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S T U D I E S AND R E P O R T S
Series M (Social Insurance) No. 17
ACTUARIAL TECHNIQUE
AND FINANCIAL ORGANISATION
OF SOCIAL INSURANCE
Compulsory Pension Insurance
Lucien FÉRAUD
Agrégé de l'Université, docteur es sciences
GENEVA, 1940
Published in the United Kingdom
For the INTERNATIONAL LABOUR OFFICE (LEAGUE OF NATIONS)
By P. S. KING & SON, Ltd.
Orchard House, 14 Great Smith Street, Westminster, London, S.W.l
PRINTED BY ALBERT K U N D I »
GENEVA
PREFACE
Compulsory social insurance, and, in particular, those branches
which deal with risks that may not materialise for some considerable
time, such as insurance against invalidity, old age and death,
have from the outset been obliged to take account of technical
considerations in organising their finances. Originally they
made use of the actuarial technique which had previously been
developed for. the requirements of commercial insurance and
pensions funds. It was soon found that the methods so far
applied had to be extensively changed in order to meet the special
problems arising out of the wide scope and special characteristics
of social insurance. As social insurance spread to increasingly
large sections of the community and to a growing number of
countries, the actuarial studies required gradually evolved a
special technique. This technique, like that of other actuarial
operations, is based on probabilities, and makes it possible in
any given case to deduce the most accurate and reliable conclusions
from the existing demographic statistics and financial data.
This actuarial technique has played a fundamental part not
only in the current supervision of the working of insurance institutions, but also in the inauguration of new schemes or the
reform of existing ones. It has often been found that the fate
of some proposed legislation depended very largely on the possibility
of finding a satisfactory technical solution whereby the desired
aims could be reached with the available means. At other times,
technical arguments have proved to be the only ones that provide
a final answer to the criticisms directed against insurance schemes.
In all circumstances experience shows that the development of
social insurance is closely linked up with the evolution of its
technique.
The International Labour Office, in its studies, has thus had
to devote attention to the actuarial technique of social insurance.
PREFACE
IV
The present volume deals with the technique of compulsory
(contributory) invalidity, old-age and widows' and orphans' insurance schemes, on the subject of which the International Labour
Conference adopted six Draft Conventions (Nos. 35 to 40) and
one Recommendation (No. 43) at its Seventeenth Session in 1933.
This work is not intended to be a handbook or a systematic
treatise on the subject; the financial organisation of social insurance
schemes depends so largely on economic, social and even political
conditions that it was felt essential to deal with the question in
a more concrete manner. A survey has therefore been given of
the most representative insurance schemes in various countries,
and the technical mechanism of each has been studied as it works
in the operation of the scheme, not merely at one given date or
at a few dates, but throughout the whole course of its development. It was therefore impossible to include in a single volume
more t h a n a few schemes; among those which have the widest
scope, the following were selected, the list being given in the
chronological order of the introduction of the schemes.
Invalidity, Old-Age and Widows' and Orphans' Insurance
Part I: 1891 to 1914. Part II: after 1924.
GREAT BRITAIN AND NORTHERN IRELAND: Part I: National Health
Insurance (1912). Part II: Widows', Orphans' and Old-Age Contributory
Pensions (1926).
ITALY: General Scheme of Compulsory Insurance against Invalidity,
Old Age and Death (1920).
BELGIUM: Old-Age and Widows' and Orphans' Insurance for Workers
(1926) and Old-Age, Widows' and Orphans' Insurance for Salaried
Employees (1927).
CZECHO-SLOVAKIA: Invalidity, Old-Age and Widows' and Orphans'
Insurance for Workers (1926).
FRANCE: General Scheme of Social Insurance (1930).
GERMANY:
for Workers.
Each of these schemes is dealt with in a separate study, based
mainly on the actuarial work which played an actual part in the
preparation, application and reform of the legislation in question.
These studies will not always absolve the reader from the necessity
of studying the legislative texts and certain original memoranda,
but they do at least provide a summary of the available information and a clue to guide the reader through a mass of documents, which are generally very numerous and scattered. The
reader will also find an outline of the main provisions of the
legislation, the basic numerical data (mortality, invalidity and
annuity tables, etc.) and a bibliography.
PREFACE
V
Most of the studies were submitted in manuscript to the competent national authorities, and the Office wishes to pay a tribute
to the invaluable assistance these authorities granted it, and to
express its deep gratitude, while naturally itself taking the full
responsibility for the published text.
*
*
*
The general plan of this work was evolved and drawn up several
years ago by Mr. Adrien Tixier, now Assistant Director, and at
that time Chief of the Social Insurance Section, who in that
capacity prescribed the method to be followed in analysing the
financial organisation of insurance schemes.
The carrying out of the plan was entrusted to the actuary of
the Social Insurance Section, Mr. Lucien Féraud, D.Sc, who
prepared all the actuarial monographs in this volume, and also the
general introduction bringing out the actuarial technique peculiar
to compulsory invalidity, old-age and survivors' insurance schemes.
It would have been possible to divide the analysis of the financial
organisation chronologically according to the dates of the more
important reforms in the insurance legislation. That is the
simplest method for a single insurance scheme, but it was not
thought to be the best in a work of an international character.
It was felt that if all the studies were drawn up in accordance
with a uniform plan—subject to certain inevitable variations—the
volume would gain in homogeneity and could be more easily
consulted as a work of reference.
The plan followed falls under four main heads:
I.
Demographic elements (biometrie tables, data concerning
the insured population and changes in that population,
etc.).
II.
Financial elements (contributions, State aid, benefit,
administrative expenses, etc.).
III.
The financial system proper—that is, financial equilibrium
and stability.
IV. Financial administration—that is, the investment of
funds, the organisation of actuarial and financial control,
and the statistical methods employed for recording results.
\I
PREFACE
A general introduction indicates, from the financial and technical
point of view, the fundamental characteristics of the insurance
schemes analysed in this volume, bringing out the differences
between their financial systems, and thus facilitating correlation
and comparisons.
With the exception of the paragraphs intended more particularly
for actuaries, in which mathematical symbols are used, the volume
should be perfectly comprehensible to any person with some
knowledge of the working of social insurance.
This work is a technical and purely objective contribution to
the study of social insurance, bringing out the structure of its
financial organisation, indicating the methods and purposes of
its peculiar actuarial technique, and thus contributing to the
improvement and development of that technique 1 .
1
For the English translation the thanks of the International Labour Office
are due to Mr. W. E. P. Loraine, F.I.A., of the Government Actuary's Department.
CONTENTS
Page
PREFACE
INTRODUCTION
m
1
L I S T OF MONOGRAPHS:
Belgium
47
Gzecho-Slovakia
83
France
167
Germany
271
Great Britain
443
Italy
517
INTRODUCTION
Of all the risks that can be covered by social insurance,
only three are considered in this volume, those of invalidity
—however defined *—old age, and death ; in the last case the
insurance benefit consists of a lump sum or a pension paid to the
insured person's surviving dependants. A scheme of social
insurance provides as a rule for all three of these risks together,
or for only two of them. None of the schemes is ever completely
independent, whether administratively or financially, of co-existing
schemes with a different scope or covering a different risk. But
for the present purpose an attempt is made, for each of the schemes
considered, to ignore whatever is not essential to its real aims.
Only compulsory (contributory) schemes are discussed, without
reference to any of the optional provisions or voluntary schemes
that often accompany a compulsory scheme.
An examination of the financial problems of social insurance
may be undertaken from various points of view, among which
distinctions may be drawn between the economic, the social, and
the technical. The immediate and the more remote effects of the
changes produced in the distribution of goods through the action
of social insurance form the subject of very interesting economic
studies. The social purposes of insurance and the conditions that
must be satisfied in order that these purposes may be fulfilled
have been described in particular in several publications of the
International Labour Office 2. These two standpoints are left out
of account here, that adopted being a third. The problems are
1
The definition used in each of the insurance schemes studied is indicated
in the separate monographs. For a general review of the various conceptions
of invalidity, cf. INTERNATIONAL LABOUR OFFICE: The Evaluation of Permanent
Incapacity for Work in Social Insurance, Studies and Reports, Series M (Social
Insurance), No. 14, 1937.
2
See the volumes dealing with the various branches of social insurance in
Studies and Reports, Series M (Social Insurance), especially Compulsory
Pension Insurance (No. 10), 1933.
2
INTRODUCTION
considered in the light in which they appear, for example, to the
management of a social insurance scheme concerned solely with
the working of the scheme. Consequently, the laws, regulations,
and judicial practice underlying the scheme, as also its administrative arrangements, are described only to the extent that is
necessary for a proper understanding of its financial organisation.
The problems discussed here may be divided into three groups.
The first arise before legislation has been enacted and are connected
primarily with its preparation; they form the subject of technical
work, usually known as the preparatory work. A further distinction
may be made after, the scheme has been put into force : on the one
hand, there are the problems arising out of the technical operations
that are necessary for its working (statistical returns and enquiries,
technical accounting, estimates, actuarial balance-sheets, etc.) and
are carried out at regular or irregular intervals ; and on the other,
those connected with the planning and application of reforms.
It is obviously impossible to take each scheme and study it as
it was organised and worked at a particular date. The end in
view is to consider not only the problems arising out of the development, adjustment or reform of a social insurance scheme, but
also the problems—often entirely different from the first—with
which the expert is faced who is consulted on the preparation of
new legislation. For this reason, although the history of each
scheme is not recounted, an attempt is made to bring out those
events in its evolution which have been of essential importance
from the technical standpoint. It is hardly necessary to point out
that in no case has the mechanism described been an unchanging
one, working in close conformity with a specified plan. On the
contrary, there have been incessant modifications; it seems, in fact,
that the reason why the financial organisation of social insurance
must rest on a technical basis is not so much to prevent any alteration of the scheme as to facilitate the reforms and adjustments
that are found to be necessary during its actual operation. Wherever occasion arises, account is taken here of this constant process
of adjustment, which is no doubt the most important function of
the technique now under consideration.
This study obviously cannot claim to provide a fuller and more
detailed analysis of any of the schemes studied than those already
made in the country concerned. The only end in view here is to
bring out the essential factors and characteristics of financial
organisation, an attempt being made to present them in the form
that appears to be best suited to a reader familiar with the insurance
INTRODUCTION
3
schemes of his own country, but not acquainted in detail with
those in force elsewhere.
The various technical conceptions met with in the course of
these analyses are all placed on the same footing, whether they
belong to the technique of private insurance or of pension funds
or have been introduced for the special purpose of solving a social
insurance problem.
By way of a general introduction, each of the headings of the
plan adopted for the preparation of the monographs will now be
discussed in turn, with a view to bringing out the main features
of the many problems raised by the financial organisation of social
insurance.
I. — DEMOGRAPHIC ESTIMATES, BASES AND EXPERIENCE
Chapter I of each monograph covers all the technical factors
which are not financial in character and can be sufficiently defined
by the statistics without recourse to the accounts. The first
section deals with the biometrie data that do not depend on
absolute figures relating solely to the insured group ; the next two
sections, on the contrary, relate to the particular group considered
and discuss respectively the insured population and the number
of beneficiaries. The figures corresponding to these two factors
are both considered with reference, not to a particular date alone,
but to their movement during as long a period as possible.
Biometrie Tables
The general title " biometrie tables " covers a certain number
of statistical results of a demographic nature, which have been
put into such a form that they can be applied to other groups
than those from which they are derived. At the inception of any
social insurance scheme, there is nearly always a complete lack of
statistics concerning the group which it is proposed to insure.
Recourse is therefore had to observations made under other social
insurance schemes in the same country or abroad, to the data
derived from pension funds, or to the results of general or occupational censuses or special enquiries. Once the scheme has been
put into force, the insurance institution usually tries to make
statistical returns, from which biometrie tables can be compiled
for the insured group itself, and these gradually take the place of
the tables that served as a basis for the preparatory work.
4
INTRODUCTION
To be complete, the study oî a biometrie table should provide
exact information on:
(1) the observations made (definition of the group under
observation, period of observation, definition and number
of persons exposed to the risk, definition of the risk, and
number of cases in which the risk materialises);
(2) the recording and examination of the observations (bodies
responsible for operations, methods employed);
(3) the construction of the table (essential formulae, adjustments) ;
(4) the use made of the table and the reasons leading to its
selection ;
(5) bibliographical references (original publications, reproductions in full or in part).
The above summary is in itself sufficient to show that a detailed
study of biometrie tables would call for a whole series of volumes.
Here, only those tables arc considered which played a direct part
in the preparation or reform of social insurance legislation, to the
exclusion of those which were used for purposes of comparison but
which were not finally adopted. Leaving out of account the many
theoretical researches into the construction or properties of the
various classes of biometrie tables, attention is paid here chiefly
to their application to social insurance technique. In a number
of cases numerical data are reproduced in full. For other tables
references are given by means of which recourse may be had to
the original documents ; owing to the difficulty that may sometimes
be met with in procuring these, reference is also made to the
more widespread reproductions, in particular those to be found
in standard works.
The biometrie tables are divided into several classes according
as they relate to:
(a) mortality;
(b) invalidity or invalidity and mortality together;
(c) morbidity (owing to its indirect effects, even though sickness
is not one of the risks considered in this study);
(d) marital condition and composition of the family.
The essential features of the tables in each of these classes will
now be reviewed.
5
INTRODUCTION
Mortality is no doubt the demographic phenomenon which was
studied first and which has been the subject of the largest number
of publications. In social insurance use is nearly always made of
the mortality tables compiled for the population as a whole from
the returns of one or more censuses and from the statistics of
deaths. As a rule these tables are prepared, for each sex separately,
by the central administrative authority responsible for the compilation of statistics, and their construction has given rise in each
country to detailed research. The figures appearing in mortality
tables are not the direct result of observations: by means of
various methods—into the details of which it is not possible to
enter here—gross figures are first determined, from which the
final figures are obtained by a process, of " adjustment ".
To bring out the significance of the figures contained in mortality
tables and to run over briefly the terms and symbols usually
employed, we may have recourse to a theoretical pattern. Take
a group of persons all of a certain (initial) age, exactly x0 years,
and let lx be the number of these persons. At the end of a year
the survivors of the group will be aged x0 + 1 and their number
will be lXo+i- Similarly, at the end of two years there will be
lXo+ 2 survivors aged xQ + 2 years, and so on, up to an extreme
age co, for which la = 0 (w varies according to the tables and
usually lies between 95 and 105 years). The discontinuous sequence
'nco '
*'xa+ h
••• )
^u
constitutes a life table. As a matter of fact, life tables are not
constructed as easily as this, because the statistical material
does not possess all the various features which have been assumed
here. Nevertheless, the result which it is sought to obtain is in
fact that corresponding to the above pattern.
When applying a life table (which may be briefly designated lx),
the number of survivors at age x + a of a group J\lx persons
aged x is obtained by the rule of three:
'•x
The ratios ~^
introduced in this way are treated as probabil-
ities of survival; the ratios - y ^ are represented by the symbols
px, whose complements qx = 1 — px constitute the annual mortality
6
INTRODUCTION
rates. A mortality table may thus be defined by any one of the
discontinuous sequences lx, px or qx.
The application of a mortality table to an insured group can be
justified only by a detailed discussion, which may. be carried out
from several standpoints. It will be sufficient here to note a few
aspects.
The groups to be considered will not be composed of persons
who at a specified date are all aged so and so many years exactly.
Consequently, the discontinuous figures of the mortality tables
must be used to obtain appropriate averages by recourse to
hypotheses—as simple as possible—concerning the distribution of
dates of birth during the year.
For any particular calculation, a mortality table only is nearly
always used ; the assumption is thus that during the whole period
covered by the calculation, " mortality at any age remains constant".
As regards social insurance in particular, the application of a
mortality table drawn from observations concerning the population
as a whole is in itself an approximation, the degree of which is
ODen to discussion, in the schemes discussed here which cover
a large proportion of the occupied population, it will be- seen that
the mortality rates applied to the whole insured population are
not drawn from observations effected in the insurance scheme
itself, but have always been assimilated to the general mortality
rates. On the other hand, when, instead of the whole insured
population, a particular group of insured persons is considered,
defined with reference to another criterion, for example invalidity
or marital condition, the definition of mortality rates is frequently
based on observations made during the operation of the scheme
itself.
Before turning to the tables which involve the conception of
invalidity (or validity), it may be noted that this conception
depends on legislation, administrative regulations, and judicial
practice and is-therefore not invariable in its significance. Tables
concerning invalidity were first prepared by pension funds for
particular classes of workers. But later they have been based,
where possible, on the statistics derived from compulsory insurance
in order that they may be exactly suited to the scope of the insurance
scheme.
The tables showing mortality rates for invalids, mortality rates
for healthy persons, the probability of becoming invalid, and
validity rates are considered in turn.
INTRODUCTION
/
, The mortality rates for invalids have been the subject of many
researches, which have led to a variety of tables:
Tables of aggregate values, which depend only on the age reached
by the invalid and are constructed in accordance with a pattern
similar to that introduced above for general mortality tables.
Tables of selected values, obtained by taking into account both
the duration of invalidity and the age reached by the invalid, or,
which comes to the same thing, the age of becoming invalid and
age reached by the invalid. These tables are no longer mere lists
of figures, but comprise both rows and columns, the former corresponding to the age of becoming invalid and the latter to the duration
of invalidity as long as it is less than a certain limit, ordinarily
not exceeding ten years.
Tables of ultimate values, which depend only on the age reached
by the invalid but do not apply until the invalidity has lasted long
enough for selection to have ceased having any appreciable effect.
There are also tables (compact) showing the cessation of invalidity
pensions, in which the figures depend neither on the age of becoming
invalid nor on the age reached by the invalid, but only on the
duration of invalidity.
As a rule the mortality rate of invalids and their rate of withdrawal from insurance are assimilated, although the latter may
depend on various causes other than death. In certain cases,
however, a correction is made to take into account the discrepancy
between the two phenomena. Further, only permanent invalidity
is considered, the assumption being that a person who has become
invalid will never return to a state of health.
The deaths of healthy persons which take place without any
previous invalidity have also been the subject of researches, which
have led to the compilation of tables of mortality rates for healthy
persons.
The tables showing the probability of becoming invalid are derived
either from the observations of pension funds or from social insurance statistics. These invalidity tables—as they are known for
short—provide " invalidity rates", which are in fact the annual
rates of becoming invalid, and therefore represent the average
number of healthy persons aged x years (in a given group of
100,000, for example) who become invalid during a year, that is,
before reaching the age x -j- 1.
If the probability of becoming invalid and the cessation of
invalidity are taken together, the pattern previously introduced
with reference to mortality alone must be generalised. Again, we
8
-
INTRODUCTION
take a theoretical initial group of lXo persons, all of a certain
(initial) age, x0 years exactly. At the end of a year the survivors
of this group include ZÄ"+1 healthy persons and lXo+t invalids, or
in all there are tXo+i -f tx\+i — lXo+l survivors. By this process
two discontinuous sequences of figures, lxa and l", are obtained,
which summed in pairs reproduce for any one value of x the life
table /,. for the group taken as a whole. The three sequences lx,
Z"", and lx form a validity table, which represents in schematic
form the evolution of mortality, of invalidity, and of the relation
between them.
The data obtained directly from observations may be used to
define the mortality of the total group composed of healthy persons
and invalids, the mortality of invalids, the mortality of healthy
persons, and the probability of becoming invalid. These data are
not all independent: a knowledge of three of them is sufficient to
determine the combined evolution of mortality and invalidity.
It will be seen that in every case the observations have been used
to provide figures concerning the probability of becoming invalid
and the mortality of invalids, but that in some cases recourse is
had to experimental mortality rates for healthy persons, while in
others, on the contrary, these rates are calculated with reference
to the mortality rates applicable to the whole group of healthy
persons and invalids together.
The morbidity rates of the insured group have an effect on the
financial situation of a pension insurance scheme. When an insured
person falls ill, he is no longer in receipt of wages, and consequently
his contribution to the scheme is not paid, unless its place is taken
by a payment from some other source. It will therefore be
necessary, as a rule, to take into account the average number of
days of sickness per insured person and per annum, that is to say
the " annual morbidity rate ". Further, it may happen, as in
Great Britain, that sickness insurance and invalidity insurance are
closely connected and that the financial equilibrium of the two
schemes cannot be separated. It is considered sufficient to indicate,
in each of the monographs, which morbidity tables have been taken
into account in the studies for the pension insurance scheme *;
in the case of Great Britain, tables relating to both morbidity and
invalidity are taken into account.
1
For a systematic study of morbidity tables, reference may be made to
à previous publication of the INTERNATIONAL LABOUR OFFICE: Compulsory
Sickness Insurance, Studies and Reports, Series M, No. 6, 1927, pp. 437-445.
INTRODUCTION
9
In many calculations it has been necessary to have recourse to
data concerning the marital condition of insured persons and
the composition of their families. This has involved the introduction of a great variety of statistical bases, comprising among
others :
mortality tables for single insured persons and" married insured
persons separately (males and females separately);
marital coefficients (males and females separately), indicating
at each age the proportion of married insured persons;
probability of marriage for females;
average age of the wife in relation to husband's age;
number and distribution by class (healthy, invalid, pensioned,
not pensioned, insured, not insured) of wives of insured persons;
number and distribution by class (healthy, invalid, pensioned,
not pensioned, insured, not insured) of widows of insured persons;
mortality rates for children;
average number of children dependent on insured persons
(according to the age of the children and the age of the father);
average number of children dependent on widows of insured
persons (according to the age of the child and the age of the
mother).
These data have not always been as adequate and complete as
might have been desired and they have had to be taken from the
most varied sources: some are derived from general censuses,
others from special enquiries and sometimes from social insurance
statistics proper.
Insured Population
The description of the insured population relates not only to
its total number but also to its distribution by sex and by age.
A distinction may be made between two main problems, relating
respectively to the insured population at a given date and to the
movement of that population.
When an insurance law is being prepared, no direct information
is available concerning the group that it is proposed to insure.
Consequently, reference must be made either to general censuses
and for preference occupational censuses, or to data drawn from
other insurance schemes already in force in the country, subject
to corrections if the scope of the schemes is not the same.
While the scheme is actually in operation, the insurance institutions try to record exact information on the number of insured
10
INTRODUCTION
persons and their distribution by sex and by age. These investigations raise a difficult statistical problem, because the insured group
is large, scattered, and constantly liable to variation owing to a
number of causes, chief among which is that the status of the
insured person is not always defined with sufficient exactitude.
The statistics of entrants are easier, but provide only a maximum
figure for the number of insured persons. A brief analysis is
given later of the principal methods used for obtaining as reliable
an estimate as possible of the number of insured persons and their
distribution by sex and by age.
In a certain number of cases the number of insured persons at
each age has been estimated over a series of years in order to
obtain a table showing the probable evolution of the insured
population. Two quite different methods have been used.
According to the first, the insured population at a given date
is to begin with considered as a " closed group " ; that is to say,
it is assumed that there are no additions to the group and that
the only decreases to which it is liable are due to causes covered
by the biometrie tables (invalidity, death). By applying these
tables to the age distribution adopted for the initial date, the
evolution of the closed group is found without difficulty. Account
must next be taken of the contingent ' entering into insurance
each year and the departures produced by causes which are not
taken into account in the biometrie tables.
For the contingent entering into insurance each year, the age
distribution is determined with reference to observations made
during one or more years, and it is next assumed that this will
remain unchanged. As a rule, it is assumed by approximation
that all the entrants into insurance belong to the lower ages, for
example, 16, 17 and 18 years. For the evolution of the total
entrants, recourse is had to one or other of the following hypotheses: (a) the total number of entrants remains constant; {b) it
increases regularly in such a way that the transition from one
year to the next is obtained by multiplying it by a " co-efficient
oí annual increase " which is higher than unity. Thus an attempt
is made to obtain an estimate of the entrants into insurance
corresponding to the new generations entering active working life.
Further, the insurance scheme may receive or lose insured
persons who, whatever their age, may change their employment
and consequently enter or leave its scope. These two movements
and also their resultant—which is all that is of importance to the
insurance scheme—are difficult to determine exactly, and still
INTRODUCTION
li
more difficult to forecast, for they are subject to wide variations
when there are changes in the complex of economic and social
conditions. The financial consequences of these variations depend
essentially on the provisions adopted concerning the maintenance
of the rights of persons leaving insurance, concerning the qualifying
period to be completed by new insured persons, and concerning
the maintenance of rights of insured persons transferring from
one scheme to another. Finally, with regard to the scope of social
insurance, migration movements involve a problem which it has
not as a rule been possible to solve satisfactorily from the statistical
point of view. It will be seen, however, t h a t a certain number
of insurance institutions have recognised the importance of this
problem and tried to collect information with a view to obtaining
a sufficiently approximate solution for use as a basis for actuarial
calculations.
With the other method, which is quite different, an estimate,
made in advance on the basis of the results of general censuses
and of certain demographic hypotheses, is used as the startingpoint for representing the evolution of the total population by sex
and by- age during a series of years. For each group and each
sub-group the transition from the total population to the occupied
population is effected by means of an " occupation ratio ", and
t h a t from the occupied population to the insured population by
means of an " insurance ratio ". The occupation and insurance
ratios are obtained by means of special enquiries.
Number of
Beneficiaries
It will be seen that the calculations for demonstrating financial
equilibrium may call for estimates of the annual " contingents "
of persons who are granted the various kinds of benefits or of
the number of persons in receipt of the various benefits at a
specified date, for example at 31 December. The contingents and
numbers of persons in receipt of benefit are calculated each year
on the bases mentioned above—that is to say, on the one hand the
biometrie tables and on the other the data defining the insured
population and its evolution.
The statistics concerning persons in receipt of benefit are among
the fullest and most exact compiled by social insurance institutions.
They relate either to the contingents which in each year of operation
(or in each financial year) joined the number of beneficiaries or
left them, or to the number of persons in receipt of the various
classes of benefit at the end of each year (or of each financial year).
12 .
INTRODUCTION
They may be recorded in various ways, according as the date
chosen as the initial (or final) date for each class of benefit is:
(1) that at which the conditions defining the materialisation of
the risk are fulfilled (or cease to be fulfilled);
(2) that of the decision to award benefit (or of the notification
of cessation of the risk);
(3) that of the first (or the last) payment made to the
beneficiary.
The monographs show examples of the use of all these various
methods; and in some cases two different types of statistics may
be found side by side in the same scheme, for the same benefits.
II. — FINANCIAL ESTIMATES, BASES AND EXPERIENCE
The second chapter of each monograph brings together the data
which are immediately financial in character and therefore depend
directly on the monetary unit. These data obviously relate to the
fundamental factors of financial organisation: contributions, subsidies, benefits, and accumulated funds. They are considered here
in turn, and for each of them an attempt is made to bring out its
essential characteristics as necessitated by the nature and functions
of social insurance, to show the significance of the calculations
involved, and to set forth the bases adopted and experience gained
in actual practice.
Contributions
In the compulsory (contributory) insurance schemes considered
here, a large part of the financial resources, sometimes practically
the whole, is derived from periodical payments, the cost of which
is shared between insured persons and employers, as a rule in equal
parts. These payments, which are given the name of contributions
or may be regarded as equivalent to contributions, must satisfy
certain conditions as to uniformity which are necessitated not by
the actual financial mechanism but by the nature and purposes
of the insurance scheme. The point is that social insurance must
make no distinctions between workers that might tend to influence
their employment. The rate of contribution must thus be independent of the insured person's age; in the schemes considered
here it is also independent of occupation, except in a few cases.
Further, it has been recognised as desirable for economic reasons
13
INTRODUCTION
that the rate of contribution should remain unchanged from year
to year, since the employer wishes to know in advance what his
share will be in order to include it in his estimate of production
costs. Nevertheless, while the rate of contributions ought not to
be liable to constant and abrupt changes, it need not necessarily
be invariable; it is considered permissible for it to rise at long
intervals, for example every ten years.
The various methods of determining contribution rates rest on
one or other of the following three conceptions:
flat rate of contribution for all insured persons of the same sex
(i.e. contribution independent of wages) ;
division of wages into classes, and flat rate of contribution within
each class;
rate of contribution equal to a fixed proportion of wages between
certain limits.
This is not the place to examine the various processes or to
discuss their respective advantages and drawbacks *. It will be
sufficient to note that as a rule the section dealing with contributions
in the monographs discusses a certain number of related data
such as:
the sex and age distribution of the wages on which the calculation
of contributions is based, and the distribution of the same wages
according to their amount or the class in which the contribution
is paid;
the average number of contribution days or weeks per year;
the number of " contributors "—that is, of insured persons who
have paid at least one contribution during a specified period or
have contributed at a given date;
the number of " full contributors "—that is, the imaginary
number of insured persons who, if they had contributed without
interruption, would together have paid during the year in question
the total sum actually derived from contributions;
the average daily, weekly, monthly or yearly wage;
the average daily, weekly, monthly or yearly contribution.
The estimates of contribution income are obtained by two
methods. The first takes as a starting-point the evolution of the
insured population year by year and arrives at an evaluation of
1
Cf. INTERNATIONAL- LABOUR OFFICE:
Compulsory
Pension
Studies and Reports, Series M, No. 10, 1933, pp. 450-467.
Insurance,
14
INTRODUCTION
the total annual income from contributions. The second involves
a calculation of the probable present value 1 of the contributions
expected in the future from all the insured persons or only from a
fraction of their total number. The most usual system is to distinguish between (a) insured persons belonging to the scheme at
a given date and (b) those entering after that date. For an annual
amount equal to the monetary unit— that is to say, for an annual
" unit " contribution—it is enough to take for each insured person
aged x at the date of calculation the probable present' value of a
temporary annuity equal in amount to unity, and to sum the results
so obtained for all insured persons in the group considered. In
order that this first result may be used to obtain the result corresponding to the absolute amounts of contributions, it is indispensable
1
The notion of probable present value may be illustrated with only slight
recourse to mathematical language. To begin with, it should be remembered
that in the case of capital bearing interest, if it is assumed that the interest
is added as soon as earned to the capital and thus itself begins to bear interest
—in other words in the case of capital at compound interest—the amount of
the capital is no longer a constant but must be regarded as a quantity that
varies with the date at which it is considered. Hence, when the calculations
relate to large capital sums or to a period of several years—as is often the case
in insurance—it is important to define not only the amount of the sum but
the date at which it is to be paid. Its present value is defined as the amount
which, if paid at once, could take the place, account being taken of the accumulation of interest at a given rate, of the payment of one or more sums
of a given amount at one or more future dates. The compound interest formula
immediately gives the present value A (o) at date t = 0 of a payment A {t)
made at date t
A(i)
A
<°> = trrj' = A(i> •v
I i being the annual interest on a monetary unit and v the discount factor
1 + l)
To arrive at the notion of probable present value, the Eulerian method
may be used and a group taken of lx0 persons aged x0 years, to which no
additions are made but which suffers withdrawals for various reasons. Let lx
equal the number of persons who still belong to the group at age x. If a sum
A («) is to be paid each time t h a t a person in the group reaches age x, the
total of these claims may be regarded as equivalent to the payment at the
initial date of as many times a certain amount A (x0) as there are persons in
the initial group. The amount A (x0) is called the probable present value at
the initial date of the payment A (x) and is obtained, account being taken
of the deductions that have occurred in the group and the accumulation of
interest, from the formula
A
(*o) lx0 v*° =
A
W lx "X
If, instead of taking a single payment A (x) due at age x, a series of payments A (xi) is taken, due at ages xi respectively, the probable present value
of these payments is defined in a similar manner. It is on probable present
values of this kind that nearly all the actuarial calculations are based.
INTRODUCTION
15
to combine the biometrie and demographic hypotheses already
accepted with certain new hypotheses of an economic character.
One of these relates to the average number of paid-up contributions,
which cannot be estimated without taking into account the degree
of employment and possibly the rate of sickness. The second,
which applies when the contribution depends on wages, relates to
the amount of wages, their variation with the insured persons'
age, and their fluctuations, with changes in" economic and social
conditions.
The very important question of the choice of the rate of
contribution is regularly left to the third chapter in all the
monographs, for it is felt that it cannot be separated from the
study of the financial system proper, owing both to its importance
and to the technical character of the methods (calculation • of
theoretical premium) which have had to be used in many cases.
The statistics compiled by the insurance institutions may relate
to all the data referred to above. They can thus provide figures
for estimating the degree of employment and level of wages of the
insured population. If the insurance scheme is wide enough in
scope, the figures may thus provide valuable information—failing
a better approximation—on the degree of employment and level
of wages of the occupied population as a whole.
Public
Subsidies
A separate section is devoted to a second source of income for
most insurance schemes, namely the subsidies provided by the
State or other public authorities. The need for financial participation by the public authorities and the part this plays necessarily
enter into the examination of the mechanism by which financial
equilibrium is established and are therefore discussed in the third
chapter of each monograph x. Here it will be sufficient to note
that, considered as a whole, the financial participation of public
authorities and in particular of the State may be conceived under
different aspects, ranging from one to the other of two extremes.
At one extreme, for example, the State may be called upon to
provide a full and direct guarantee of the financial equilibrium
1
In particular, it will be seen that the participation of the public authorities
is usually connected with the burden assumed by the insurance scheme during
the " transitional " period (see p. 23)—that is to say, its essential purpose
is the paying off of the " initial liability " (see p. 30).
16
INTRODUCTION
of the insurance scheme ; in this case, the national budget for each
financial year must include the sums needed to bring the income
of the insurance scheme to the same level as its expenditure.
Preference is usually given, however, to the other extreme, based
on the idea of self-sufficiency in social insurance, according to which
the insurance budget is drawn up separately from the national
budget, though this does not necessarily prevent the inclusion in
the latter of subsidies, fixed in advance, for the benefit of the
insurance scheme. Which of these two tendencies prevails will be
determined by considerations that are not connected solely with
social insurance but relate to the organisation of public finance
and ultimately to the economic functions assigned to the State
and other public authorities. However, in considering the financial
problems of social insurance it is nearly always desirable to assume
conditions of self-sufficiency—that is to say, to take each institution
or each scheme as a separate accounting unit. It may also be
noted that the financial participation of the State sometimes takes
forms that do not appear at all in the accounts of the compulsory
insurance scheme; for example, the State may assume the cost.
which need not be small, of a system of non-contributory benefits
to buttress the contributory scheme.
The amount of the financial participation of the State or other
public authorities may vary so considerably from one scheme to
another that it escapes all argument of a general character. At
the most one may note a constant tendency to avoid large-scale
occasional subsidies and to prefer regular payments that remain
practically, if not altogether, constant in amount.
Chapter II of each monograph reviews the data and factors
which serve to define and evaluate the income of the insurance
scheme derived from public subsidies. The participation of the
public authorities may take a variety of forms \ the commonest
of which are the following:
payment of a lump sum;
allocation of the proceeds of certain taxes or dues;
temporary or exceptional subsidies;
payment of a contribution or a fraction of the contribution;
payment of a fraction of total benefits or the whole of certain
benefits;
payment of a supplement to the insurance benefits: the individual amount of the supplement may be uniform, but it may also
1
Gf. Compulsory Pension Insurance, pp. 473-482.
INTRODUCTION
17
depend on the time spent in insurance and the amount of contributions paid;
payment of certain expenses (administrative expenses, etc.);
guarantee with respect to any deficit that may occur in a
particular financial year;
guarantee with respect to the " uncovered actuarial liability " 1 ;
guarantee limited to an amount fixed in advance.
When the amount of the subsidy depends either on the number
and amount of contributions or on the number and amount of
benefits, the estimates concerning contributions or benefits immediately lead to an estimate of the charge assumed by the public
authorities, and the statistics concerning subsidies may be incorporated with the figures obtained from the actual payment of
contributions or benefits as the case may be.
• Benefits
The benefits provided by a pension insurance scheme consist
in the main of:
temporary or permanent pensions for invalidity;
treatment for the prevention and cure of invalidity;
old-age pensions (or the capital sum representing the cover
for such pensions);
lump sums at death and temporary or permanent pensions for
widows (or widowers), orphans, and in some cases other surviving
dependants.
All or part of the payments made in respect of old-age insurance
may be reserved for the insured persons' surviving dependants.
In some cases an allowance is added to the amount of the benefit
when the beneficiary has one or more dependent children, until
they reach the age at which their education is deemed to be
completed.
The various rules which have been applied for defining the
conditions of award or withdrawal of benefits and calculating
their amount are systematically studied in the volume published
by the International Labour Office previously mentioned 2, which
brings out in particular their economic effects and social significance.
1
2
This expression will be defined later, see p. 30.
Compulsory Pension Insurance, pp. 168-226.
2
18
INTRODUCTION
From the point of view of financial organisation alone, the
components of benefits, apart from certain supplementary or
optional benefits the amount of which is not determined in advance,
may be divided into two groups:
(1) Components whose amount is fixed and is consequently
uniform for a group of insured persons (in particular the basic
amounts).
(2) Components calculated with reference to the contributions
paid on the insured person's behalf or to his wages or to the
contribution period, or to a combination of these data. This
group may in turn be subdivided into two. The first sub-group
comprises benefit components corresponding to the contributions
paid on behalf of the insured person in virtue of the actuarial
formulae customarily serving as the technical basis for individual
life insurance or invalidity insurance policies; the calculation of
the amount of the benefit is then obtained by equating the probable
present value of the benefit component in question to the probable
present value of the fraction of the contribution devoted to covering
that component. In the second sub-group the calculation is based
on a different principle, and as a rule the benefit component is
computed by means of a linear equation, the terms of which
include both its amount and the data on which it depends.
It should be noted that social insurance contributions and
benefits do not as a rule correspond to each other in the same
way as premiums and annuities under individual life insurance or
invalidity insurance policies. In other words, the relations
between income and expenditure which arise from individual life
insurance policies do not constitute a sufficient mechanism to
enable social insurance to achieve its proper ends. A social insurance scheme cannot in fact fully carry out its purpose unless it is
able to grant, in the event of the materialisation of one of the
risks it covers, benefits at such a level that they can guarantee
the " social security " of the recipients. Moreover, it is essential
to note that there must be no delay in fulfilling this purpose.
The financial problems would appear in an altogether different
light if only those workers who had been insured since the
beginning of their working life could claim benefits. This distinction
will be shown later to play a fundamental part in the study of
financial systems 1 .
1
See below, p. 23.
INTRODUCTION
19
The evolution of the cost of benefits depends in the first place
on the number of beneficiaries and the method of calculating
each benefit. The total annual expenditure nearly always rises
during the first years of operation of the scheme. At the beginning
it is usually nil, owing to the qualifying period that must be
completed before a claim to benefit can be made. After that it
remains fairly small during a certain period, even though the
maximum rate of benefit may be applied at once. The reason
is that during the first year after the completion of the qualifying
period, benefits are paid only to a single annual contingent (though
this may be unusually large); in the second year a further contingent of beneficiaries is added to the remainder of the first, and
so on. By this process of accumulation the annual cost of benefits
rises from year to year, whatever the effects of the various factors
that can make their influence felt. It may therefore be concluded
that for any particular insurance scheme taken from its inception
the expenditure corresponding to benefits is characterised mainly
by the level about which the annual total tends to stabilise itself
and by the rapidity of the rate of increase during the first decades
of working.
As in the case of contributions, the estimates are obtained by
two quite different methods of calculation. The first starts with
a preliminary estimate (made, as already indicated, on the basis
of the biometrie tables and the composition of the insured population) of the number of persons in receipt each year of the various
benefit components. The numbers so calculated are multiplied
by the average value of the benefit component in question. This
average value is obtained either by the formula which is prescribed
by legislation for determining the amount of the benefit component, or by data derived from the biometrie tables and the
composition of the insured population, or by an enquiry or partial
return made during, the actual operation of the scheme. This
method leads to an annual estimate of the cost of each benefit
component.
The second method consists essentially in the calculation of::
(1) the probable present value of acquired rights, that is to say,.
of the benefits still due to a beneficiary aged x; (2) the probable
present value of rights in course of acquisition, that is to say, of
the benefits to be paid, in the event of materialisation of the risk,,
to an insured person aged x or his dependants. The calculation
of these present values is by no means without theoretical interest,
since the classic actuarial formulae used for the purpose have to be
20
INTRODUCTION
specially adapted, on the one hand, in order to turn the available
biometrie data to the best possible account, and on the other, to
find a solution for the special problems arising out of the technique
of social insurance. An account is given in each monograph of
the formulae used for obtaining the probable present values of
the principal benefit components on the basis of a unit amount;
with these fundamental formulae there is no difficulty in deducing
the probable present values of all the benefits. As in the case of
contributions, the final results are obtained by summing the
present values for the whole group of insured persons, a distinction
being made, if necessary, between the initial insured population
and the persons joining the scheme after its coming into force.
During the working of an insurance scheme the amount of a
particular benefit is determined either, as in the case of a pension
or a capital sum resulting from individual payments, by recourse
to schedules similar to those used for individual life insurance or
invalidity insurance policies, or by recourse to à simple arithmetical
calculation when as already indicated the calculation is based
upon a linear equation 1.
The experience of the scheme as regards each benefit or benefit
component relates essentially to its average value and the total
annual expenditure. In this connection two remarks made above
with regard to the statistics of beneficiaries may be repeated:
the observations may relate either to pensions whose payment
begins or ends within a given period or to pensions in course of
payment at a given date; the figures arrived at differ with the
definition adopted for the dates of commencement and cessation
of benefits.
Other Income and Other Expenses
For several schemes there is occasion to consider other sources
of income and other items of expenditure, including the following:
(1) interest on accumulated funds, which is taken into account
separately in cases where the evolution of the different
items of income and expenditure are examined year by
year;
(2) initial and exceptional endowments;
1
See above, p. 18.
INTRODUCTION
21
(3) administrative expenses which it is not always possible to
estimate exactly;
(4) special kinds of benefit (benefits in kind, cash grants, etc.).
Another item of income and of expenditure results from the
provisions adopted for the maintenance of the rights of insured
persons who transfer from one insurance scheme to another. The
transfer may take place within a country or, on the contrary, be
the effect of migration. It raises a very important but also very
difficult problem, the solution of which depends on the financial
systems of the schemes concerned. This study is not the place for
examining the technique on which the maintenance of rights of workers who insure successively with several schemes may be based 1.
All that is given is a. few brief indications, devoted solely to the
effects on the financial equilibrium of the schemes considered of
the entrance and withdrawal of insured persons coming from or
going to other social insurance schemes.
Accumulated Funds
When an insurance scheme is put into operation, it has no
capital, except in a few rare cases. It has been seen that in
general the rates of contribution are at once fixed at their normal
level while the cost of benefits, which to begin with is nil, gradually
rises. This being so, surpluses will automatically accumulate
from the date when the scheme is put into operation and during
a certain number of years. The accumulation of funds may thus
be regarded as a direct consequence of the rules fixing the rates
of contribution on the one hand and the conditions of award
and amount of benefits on the other.
The accumulated funds are in the first place the protective
reserves that an insurance scheme needs as much as any other
undertaking. They may comprise, in addition, either the whole
1
The maintenance of rights in course of acquisition and acquired rights
under invalidity, old-age and widows' and orphans' insurance on behalf of
workers who transfer their residence from one country to another is the
subject of international Convention No. 48, adopted by the International
Labour Conference in 1935 at its Nineteenth Session. The Convention came
into force on 10 August 1938. A systematic study of the question was made
by the International Labour Office in two preliminary reports: Maintenance
of the Rights in Course of Acquisition and the Acquired Rights of Migrant
Workers under Invalidity, Old-Age and Widows' and Orphans' Insurance,
International Labour Conference, Eighteenth Session, Report IV, 1934;
Maintenance of Rights in Course of Acquisition and Acquired Rights under
Invalidity, Old-Age and Widows' and, Orphans' Insurance on behalf of Workers
who Transfer their Residence from one Country to Another, International Labour
Conference, Nineteenth Session, Report I, 1935.
22
INTRODUCTION
or a part of the actuarial liability 1 . The part played by accumulated funds in the maintenance of financial equilibrium 2 and
the questions arising out of their investment 3 are examined later.
III.
—
FINANCIAL SYSTEM
In each of the monographs composing this volume the first two
chapters are devoted to a description of the factors and data
used in actuarial technique or statistics which together form the
fundamental bases of the financial organisation of the insurance
scheme. The third chapter discusses, under the heading financial
sijstem, this financial organisation itself, with special attention to
its essential function, the realisation and maintenance of financial
equilibrium. It is thus necessary, for each of the schemes considered,
to bring out one or more conceptions of equilibrium between
resources and charges and to examine the necessary and sufficient
conditions for establishing such equilibrium and keeping it stable.
In studying the financial system of insurance schemes, particular
and constant attention is given to the problem of financial equilibrium. Accordingly, any researches made with a view to estimating
the economic or social effects of the working of a scheme as a whole
or of a particular provision are left out of account, even though
they may be definitely technical in character 4. Only in a few
cases is it possible to distinguish between the three risks, invalidity,
old age, and death, for in most of the schemes studied financial
equilibrium is not established or even considered for each risk
separately, but only for all three or for two of them together.
The presentation of the technical problems arising directly out
of the establishment and maintenance of financial equilibrium
differs according as they are met with during the preparatory
work for the introduction of a new insurance scheme or during
the working of an existing scheme in connection with a proposed
reform, and according as they relate to operations connected with
the working of the scheme or to its actuarial control. These
various alternatives are discussed in turn.
Before any study of financial equilibrium can be made, it is
indispensable to note t h a t a precise and full statement of the
1
2
3
4
The definition of this term is given below, p. 26.
See below, p. 31.
See below, p. 37.
It is not considered that the distribution of charges over the various
generations calls for a general discussion, since it depends essentially on the
financial system, of which it is an immediate consequence.
INTRODUCTION
23
problem to be solved necessarily includes a certain number of
facts on which the acceptable solutions depend. Thus before
looking for a solution, it is necessary to know whether the public
authorities participate financially in the scheme, and if so to
what extent; further, whether the financial administration of the
scheme is centralised or, on the contrary, divided among several
large or small institutions; and lastly, what the functions of the
scheme are with regard to persons insured during the transitional
period. In the evolution of an insurance scheme, a distinction
must as a rule be drawn between the initial period, known as the
transitional period, and the subsequent period, known as the
normal period. From the theoretical point of view the normal
period is reached when a sufficient number of years have elapsed
after the scheme has been put into operation for it to include
only persons who could have belonged to it from the age fixed
as the lower limit for admission to insurance. Until that date,
a certain number of workers completing a normal working life will
have been obliged to enter the scheme when older than that age
limit. It is clear that the problem of financial equilibrium is
altogether different according as it is considered in relation to
the one or the other of these two periods. Obviously it is in the
normal period that the simplest and in every respect the most
satisfactory methods can be adopted. In actual fact, however,
the only important problem for social insurance is found to be
that of the transitional period. For there is no social insurance
scheme in existence which has operated without modification long
enough to include only persons (among workers having had a
normal working life) who have been subject to the same legislation
since they were at the lowest age limit for entering insurance.
A social insurance scheme cannot remain unchanged in the midst
of the variations that economic and social conditions undergo.
It therefore has periodically to be reformed. The financial problems
that arise in connection with each of these reforms can never be
treated fully with reference to the normal period alone. The
study of financial equilibrium must therefore always be undertaken
with reference to a scheme that is still in the transitional period.
Hence it is indispensable to examine the provisions adopted on
behalf of the insured persons who were unable to join the scheme
at the lower age limit, and in particular their period of employment before the scheme was put into operation, to the extent that
this period is taken into account for the purpose of establishing
a claim to benefit or of increasing the amount of benefit.
24
INTRODUCTION
The necessity of founding pension insurance schemes on a
technical basis was- evident from the outset. It is true that certain
benefit funds tried to work on purely empirical lines, so that the
amount or even the award of benefits depended on the financial
situation of the moment. But the results obtained were unsatisfactory, even though as a rule the only risk involved—that of
sickness—was one for the near future and of short duration. When
it was proposed to cover the risks of invalidity, old age and death,
account had to be taken of obligations to be met at a comparatively
remote date, which meant that a financial system based on
technical calculations at once became indispensable. In the search
for a suitable technique for social insurance, several tendencies have
been displayed. One idea has been to employ the methods used
in private insurance for the provision of life annuities or invalidity
pensions; in this case, the system known as that of individual
accumulation is adopted, contributions paid on behalf of each
insured pei son being entered into an individual account for the
puipose of accumulating the sum needed for the payment of
benefit, account being taken of compound interest and withdrawals
from the scheme owing to death or invalidity. A second method'
has been to have recourse to a system of collective accumulation
such as had previously been employed by pension funds; here
the cost of benefit is covered by requiring all insured persons to
pay the same average premium. In yet other cases recourse has
been had to a so-called assessment system: the contributions paid
during a year or other specified period cover either the benefits
paid during the year or period (assessment proper) or the capital
corresponding to the pensions awarded during the year or period
(assessment of capital cover). In most cases, however, recourse has
been had to a mixed financial system based, from the technical
standpoint, on several methods.
As a matter of fact, the financial systems on which the social
insurance schemes covering the risks of invalidity, old age and
death—and in particular the schemes described in this volume—
are actually based show at once on more detailed investigation
that each of them constitutes a highly complex whole, subject to
numerous modifications. The study of financial systems is thus
a somewhat difficult one; in particular it is impossible to classify
them in clearly defined groups 1 or to distinguish between them
1
Several classifications are conceivable according to various criteria, such
as the ratio of the yield from contributions to the cost of benefits in each year,
the amount of accumulated funds, etc.-
INTRODUCTION
25
merely by nomenclature. No doubt the expressions " accumulation ", " assessment ", etc., are classical and for this reason
cannot be left out of account, but it must be noted that they
are not sufficient in themselves to describe a financial system.
In the course of a discussion on any one insurance scheme,
these expressions may explicitly or implicitly be given a meaning
on which all are agreed. But when the discussion extends from one
scheme to another, and even more from one country to another, the
significance given to the same expression may vary considerably.
It will be seen in fact that in the financial organisation of a single
scheme several of these terms are used, being applied to the
various technical mechanisms entering into the scheme.
In point of fact the financial system of a social insurance scheme
covering the risks of invalidity, old age and death involves, from
the actuarial point of view, a number of calculations based on
different methods. This is not the place for a systematic examination of these methods ; it is considered preferable to abstract from
the many conceivable financial systems three patterns, and, by
way of introduction to this study, to describe each of the three.
Although in practice the whole structure of the financial organisation of a social insurance scheme is never built up on one such
pattern alone, it is hoped that this procedure will make the
mechanism of the principal methods of calculation employed for
the actuarial work as clear as possible, since they are described
with reference to the actual conditions in which they have been
used. The first schematic financial system considered is that in
which financial equilibrium is established individually for each
insured person. It is called here for short the " individual accounts
pattern ". Its description is followed by that of two other
schematic financial systems, in which financial equilibrium is
established collectively for all insured persons together, or for a
group of insured persons ; they are called here the " average
premium pattern " and the " annual estimates pattern ". For
each of these patterns, an account is given of the principle on
which financial equilibrium is based, the mechanism by which it
is established, and the operations carried out in the actual working
of the scheme, in particular those for the technical control of the
financial situation.
Individual Accounts Pattern
The essential principle on which this pattern is based rests on
an individual conception of financial equilibrium: at the date
26
INTRODUCTION
when a worker enters insurance, the liabilities x and expectations 2
of the scheme with respect to him are equivalent in the actuarial
sense, or in other words their probable present values are equal.
From this equality it at once follows that there is a very close
connection between the contributions paid for each insured personand the amount of the benefits that he may be granted; benefits
are related to contributions in much the same way as annuities
or capital sums insured by private insurance companies are related
to the premiums paid under individual policies. In fact, the
benefit amounts are determined according to schedules similar to
those which serve as the technical basis for individual life insurance
or invalidity insurance policies. It has already been seen 3 that
benefits cannot depend on contributions in this way if the scheme
is to fulfil its function completely and in particular provide
adequate protection for insured persons during the transitional
period. It follows at once that the individual accounts pattern
is not in itself sufficient for the financial system of a social insurance
scheme.
Let us consider the working of this pattern more closely.
The contributions paid in the name of each insured person are
registered (in an individual account) with a reference to his age
at each payment, and the amount of benefits to be granted if the
risk materialises is calculated directly from these entries. As a
rule the payment of a constant contribution is effected at regular
intervals for each insured person. At any age x + t after the
age x at which a person enters insurance the probable present
value of the expectations of the insurance institution is usually,
for each risk and each insured- person, lower than the probable
present value of its corresponding liabilities. The difference
between the probable present value of the liabilities of the insurance
scheme with regard to all the insured persons and the probable
present value of all its expectations is called the actuarial reserve
or premium reserve or again the actuarial liability4. This " prospective " definition of the actuarial liability is equivalent to the
1
2
3
4
These comprise all or part of the benefits and the administration expenses.
That is, the contributions and, possibly, public subsidies.
See above, p. 18.
It will be seen that the actuarial reserve appears on the liabilities side
of the balance-sheet, whereas other reserves, such as the contingencies reserve,
appear on the assets side. The expression " actuarial liability " removes all
risk of confusion. Cf. H. GA.LBR.UN: De l'organisation des caisses de retraites
(Gauthier-Villars, Paris, 1939), p. 12; and S. DUMAS: Répartition ou capitalisation dans l'assurance des personnes (Librairie de l'Université, Lausanne,
1937), p. 33.
27
INTRODUCTION
" retrospective " definition obtained by taking the difference between
the probable present values of liabilities and expectations relating
to the period between the age of admission x and the subsequent
age x + t.
The individual accounts pattern calls for a process of technical
accounting by means of which the results of each financial year
can be analysed at first sight 1 . At the end of each financial
year, nearly always at 31 December, a valuation is made. The
value of the actuarial liability at t h a t date is calculated; the
knowledge of this liability makes it possible to analyse the results
for the financial year in question. Within the " profit and loss "
account, several separate accounts are opened, for each of which
the probable value of the balance is zero; these accounts are
defined in such a way t h a t the values of their balances bring out
separately the financial effects of variations in mortality or invalidity rates or in the yield of accumulated funds 2 . When the balances
in these different accounts are known, the balance-sheet at the
date of the valuation can be drawn up, showing essentially on the
assets side an estimated value of the investments and on the
liabilities side the amount of the actuarial liability as calculated.
With a financial system of this pattern, a number of operations
calling for actuarial technique are required, chief among which
are establishment of the benefits schedule, organisation of the
technical accounting, calculation of the actuarial liability, valuation
of the investments, calculation of the rates of yield, selection of
the rate of interest serving as a basis for calculation (the actuarial
rate), organisation of the statistical work and comparison of its
results with the biometrie tables adopted as a basis.
Average Premium
Pattern
Here, financial equilibrium is again defined by the relation
between the probable present values of the liabilities and expectations of the scheme; but the liabilities and expectations are no
longer considered for each insured person separately, b u t only for
the whole insured group or for certain subdivisions. It is clear
that, corresponding to each subdivision, there will be a different
1
As proof that such accounts, while respecting the general rules for all
accounting, are of a special nature owing to their very purpose, it is sufficient
to note that the actuarial liability is as a rule much the largest item on the
liabilities side of the balance-sheet (it often exceeds three-quarters of the
total).
2
For a detailed study of this technical accounting, cf. H. GALBRUN, op. cit.,
pp. 14-31.
28
INTRODUCTION
definition of financial equilibrium. I t will be Sufficient here t o
recall the divisions into financially independent groups most usually
employed. Sometimes t h e liabilities and expectations are considered for a limited ' period only, a t t h e end of which t h e problem
of equilibrium has t o come up for reconsideration either by t h e
same method or by another. Sometimes t h e insured persons are
divided into " generations ", or groups consisting of persons born
in the same years; an important special case, described in more
detail later, is t h a t in which a distinction is made between the
insured membership on a particular date and the contingents
t h a t enter insurance in each of t h e following years. Finally,
when insured persons are divided into classes according t o the
amount of their wages, financial equilibrium m a y be considered
separately for each class.
The pattern considered here is based mainly on an actuarial
calculation for determining t h e value of an average premiumx
—that is to say, of the annual premium which satisfies the condition
of financial equilibrium for a n insured group assumed t o be financially independent, either indefinitely or over a specified period.
The average premiums may b e calculated for different groups and
for different periods. If all insured persons, present and future,
are taken together, a general average premium is obtained. These
theoretical results can serve as a guide for selecting the rates of
contribution. In fact, with such a pattern, the rate of contribution
actually applied is fixed a t a value approaching the figure obtained
from t h e calculation of t h e average premium. It may happen
t h a t reference is also made t o t h e individual premium t h a t t h e
insured person would have had t o pay under an individual policy
in order t o acquire t h e same rights as those guaranteed by t h e
social insurance scheme; sometimes it is held t o be indispensable
that t h e rate of contribution should not exceed this premium,
and sometimes it is considered sufficient t h a t the difference between
the two should not be great.
1
The calculation of average premiums has been the subject of many
actuarial studies. There is no room here to enumerate them all; it will be
enough to mention three standard works, which may be said to have laid the
foundation on which all subsequent study of the question has been or must
necessarily be based:
J. KAAN: "Die Finanzsysteme in der öffentlichen und in der privaten
Versicherung " in Mitteilungen des österreichisch-ungarischen
Privat-Versicherungsanstalten, 1909 (Vienna).
Verbandes der
L. VON BORTKIEWICZ : " Die Deckungsmethoden der Sozialversicherung "
in Report of the Sixth Congress of Actuaries (Vienna, 1909).
F. CANTELLI: " S u i metodi di calcolo nelle assicurazioni sociali", in Le
Assicurazioni Sociali, Voi. I I , No. 2 (Rome, 1926).
INTRODUCTION
29
The calculation of average premiums is combined, in the
preparatory work undertaken before the introduction of the social
insurance scheme, with a preliminary valuation, which consists, in
fact, in comparing the probable present values 1 of the financial
resources and charges of the scheme. A separate valuation is
made for each financially independent group, and includes:
on the assets side, the probable present values of contributions
and of State subsidies;
on the liabilities side, the probable present values of benefits
and of administrative expenses.
It may happen t h a t the State subsidies do not appear in the
preliminary valuation either because they are incorporated directly
with contributions or because they do not enter into the financial
mechanism proper—as, for instance, when their object is the
payment of a supplementary benefit.
For the calculation of the probable present values of liabilities
and expectations, it becomes necessary to take account of insured
persons who leave the insurance scheme for reasons other than
those covered by the biometrie tables. It has been seen that it
is difficult to estimate the movement of withdrawals in advance.
In some cases it has been considered sufficient to fix a maximum
limit for its financial consequences, and in others it has been
incorporated in the calculation of the general average premium
by recourse to certain hypotheses 2.
The control of the financial evolution involves mainly the
establishment of an accounting balance-sheet each year and an
actuarial balance-sheet at intervals of several years, as a rule two,
three, four or five. The actuarial balance-sheet resembles the
preliminary valuation; but the latter includes an estimated value
of investments in exceptional cases only, while the former always
includes this item among its assets. The actuarial balance-sheet
takes into account a certain number of new data brought out by
the statistics of the working of the scheme, and also shows the
probable present value of acquired rights.
The very important questions of the technical reserve and the
amount of accumulated funds in a schematic financial system of
this pattern may now be considered.
1
These are calculated on the basis of a single rate of interest called the
actuarial
rate.
3
One of the questions on the agenda of the Twelfth International Congress
of Actuaries is that of abnormal withdrawals and their influence on the
calculation of premiums and actuarial reserves.
30
INTRODUCTION
The difference at any date between the probable present value
of the liabilities and expectations of the scheme in respect of
insured persons gives, by means of a prospective definition 1 , the
amount of the collective technical reserve. If the group for which
the average premium is calculated includes only persons belonging
to the scheme at the date of calculation, the collective technical
reserve coincides with the actuarial liability as defined above in
the section dealing with the individual accounts pattern. But it
is lower than that reserve if, in virtue of the lasting and compulsory
character of insurance 2 , the average premium has been calculated
for a group comprising both present and future insured persons.
In order to make the position clear, we may consider the
working of the scheme from its inception and assume t h a t the
financial system is based on a general average premium. The
actuarial liability calculated for the initial membership could
be covered at the outset only by a large initial endowment;
as a rule, the greater part, if not all, of this actuarial liability
remains uncovered, and constitutes the initial liability.
The
contingent of insured persons entering in any particular year
normally comprises a large proportion of the younger generation,
and the corresponding premium would therefore be lower than the
general average premium. Consequently, for this contingent
taken separately, the probable present value of expectation exceeds
that of liabilities, and the operation of insurance begins not with
a liability, as in the case of the initial membership, but with an
asset. An insurance scheme a t its outset may roughly be regarded
as the amalgamation of (1) a scheme limited to the initial
membership, and (2) a series of schemes limited respectively to
the first, second, etc., annual contingents. Each of these schemes
applies to a closed group. The first shows an initial liability,
while each of the others begins with an asset, and financial
equilibrium is established in such a way t h a t the sum of the
assets balances the initial liability.
By definition, the general average premium is higher than the
premium corresponding to t h e contingent entering insurance each
year, but lower than t h a t which should be applied to the initial
1
The collective technical reserve may also be defined retrospectively; the
two definitions lead to the same result if, when the average premium is put
into
operation, the group considered is financially independent.
2
If the scheme is administered by several financially independent institutions, the compulsory character of insurance applies to each separate
institution, so that the insured community may in each case be regarded as
a group which is necessarily renewed.
INTRODUCTION
31
membership if it were treated as a closed group a . It immediately
follows that the general average premium leads to a smaller
accumulation of funds than in the case of the average premium
calculated for the initial membership. In other words, the collective technical reserve is lower than the actuarial liability.
This leads to a distinction between two different conceptions of
the function of the funds accumulated as technical reserves.
According to one conception, the object is to safeguard the
theoretical possibility of liquidating all the operations undertaken
by the insurance institution: the probable present value of the
liabilities may not exceed the probable present value of the
expectations plus the total amount of the accumulated funds. It
is admissible that from the inception of the scheme the payment of
a surcharge on the premium should be required for the purpose of
constituting a reserve equal to the actuarial liability. According
to the other conception, on the contrary, it is considered that,
owing to the permanence of social insurance and the compulsion
to insure, there is no occasion to contemplate the liquidation of
all the liabilities and expectations at a particular date. The
accumulated funds ought never to reach the figure for the amount
of the actuarial liability, but the income they produce is nevertheless sufficient to fulfil their function of maintaining financial
equilibrium, in combination with the other fundamental factors of
the scheme. Both these conceptions may be employed in the
technique of social insurance, but it may be remarked that the
amount of the accumulated funds, while always remaining—as
already seen—lower than the actuarial liability, may reach a
variety of values. For example, to take a scheme in which the
cost of benefits, starting at nil, rises gradually up to a maximum,
at which it becomes stabilised. When the general average premium
is introduced at the inception of the scheme, funds are accumulated
as long as the cost of. benefits is lower than the income from
contributions in each year. It will at once be seen that the
accumulation of funds will be smaller during the period of application of the general average premium if that premium is adopted
only after a certain time has elapsed since the inception of the
scheme. The longer this time is, the smaller will the accumulation
of funds be; and in the extreme case, in which the calculation
1
To take this premium as the rate of contribution is implicitly to assume
that the age distribution of the persons entering insurance each year is the
same as that of the initial membership. In compulsory insurance it is certain
that the age distribution of the annual contingents is more favourable than
that of the initial membership.
32
INTRODUCTION
and introduction of the general average premium do not take
place before the cost of benefits has reached its maximum, it will
be nil. It may therefore be concluded that the amount of the
funds accumulated in consequence of the adoption of a general
average premium depends in the main on the increase in the cost
of benefits after the general average premium has been put into
operation.
"With the average premium pattern, the principal task of actuarial
technique is to calculate the average premium, make the preliminary valuation, and prepare the actuarial balance-sheets. In
order that these balance-sheets may be drawn up with all possible
precision and exactitude, the insurance institution usually tries
to compile the statistics of working of the scheme on the lines
indicated by the actuarial services.
The actuarial balance-sheets and the technical work for which
they call allow not only the control of the financial evolution of
the scheme, but also a critical analysis of the sources of profit
and loss. Consequently, they may lead their authors to suggest
measures likely to restore a sound financial situation or to extend
the social utility of the scheme. In actual fact, the conclusions
drawn from the actuarial balance-sheets have very often played
a decisive part in the reforms made in social insurance legislation.
Annual Estimates Pattern
The annual estimates pattern, like the average premium pattern,
rests on a collective conception of financial equilibrium. The
total resources are made at least equal to the total charges either
for each financial year or for a period comprising several consecutive years. If equality of the two totals is regularly achieved,
the obvious result is equality in the probable present values that
would have been established with the average premium pattern.
In addition, it affords a guarantee that the scheme will at any
time be able to meet its financial obligations.
The definition shows that this pattern must be based on a
table giving for each financial year an estimate of probable resources
against one of probable charges. This annual estimate table may
be compiled either for the whole of the insurance scheme or only
for a part—a special fund whose situation is considered separately.
As a rule it covers only a certain number of consecutive financial
years, and consequently does not fully solve the problem of financial
INTRODUCTION
33
equilibrium. It may happen in some cases t h a t , by taking other
considerations into account, it becomes possible by affirm t h a t
from the last date of the period onward, financial equilibrium will
be easy, or at least comparatively easy, to establish. In the
other cases, the conclusions to be drawn from this table must be
combined with a comparison of the probable present value of
liabilities in respect of an unlimited period with t h a t of the
corresponding expectations. This comparison in effect is simply
an actuarial balance-sheet (or a preliminary valuation) identical
with those required by the average premium pattern. It may
be made, moreover, for any one of the years covered by the annual
estimates table x.
This being the principle on which the annual estimates pattern
rests, it should be noted t h a t it is not incompatible with the
accumulation of reserves, whether temporarily or even permanently.
It may happen that during a certain number of years resources
exceed charges and funds accumulate, and t h a t during the following
years the contrary takes place, and the accumulated funds are
gradually absorbed in order to meet the annual deficits. In other
cases, equilibrium is established, during a particular financial year
or other period, between financial resources and the capital sum
representing cover for the pensions awarded during the year or
period in question, plus the cost of benefits other than pensions
and of administration. In t h a t case the system involves an
accumulation of funds to an amount representing the probable
present value of acquired rights; in other words, the acquired
rights reserve is actually constituted. Sometimes, instead of providing for equality between total resources and total charges, it
is considered sufficient to take only the resources and charges for
a fund separate from the rest of the insurance scheme. As already
mentioned, public subsidies are included in resources unless they
can be distinguished from the financial system proper.
If, when an insurance scheme is being drawn up, this third
pattern is used, it follows from what has been said above t h a t
an initial annual estimates table must be made, and at the same
time, in most cases, a preliminary valuation. The control of the
financial situation during the working of the scheme will require,
in addition to an accounting balance : sheet, the following operations :
the initial annual estimates table must be reviewed periodically
with reference to the recently compiled statistics, and must at the
1
The annual estimates table and the calculation of the probable present
values are based on a single interest rate, which is called the actuarial rate.
3
34
INTRODUCTION
same time be extended by a certain number of years; periodically
prepared balance-sheets must take the place of the preliminary
valuation. In many cases an annual estimates table and an
actuarial balance-sheet are drawn up at the same time at regular
intervals.
An examination of the insurance schemes studied in this volume
will show that the financial system of each is based mainly on a
combination of the principles and methods brought out by the
above description of three 'typical patterns. The conceivable
systems are infinite in number, and it is clear that the financial
results of an insurance scheme depend not only on the combination
of technical methods which form its financial system but on the
numerical values adopted for the basic data. Different results
may be obtained by the use of the same methods and, conversely,
different methods may lead to the same results. It would therefore
be meaningless to make a comparison of financial systems without
reference to the circumstances and conditions that led to their
adoption or maintenance.
The comparison can be stated as a well-defined problem only
when the adoption of certain bases and the choice of certain
numerical values are taken as postulates and when the surrounding
economic and social conditions and the results which it is intended
to achieve are known at least approximately. There are thus as
many problems as there are admissible conditions; a number of
them have been treated in purely theoretical works or in relation
to the factors of a particular insurance scheme. The financial
organisation of each scheme raises a special problem, which differs
at least in some subsidiary aspects from all those that have been
solved in the past. Further, it is not difficult to realise that two
different financial systems may produce the same results when
certain conditions are fulfilled.
From the purely technical point of view the following may be
deemed to be essential qualities of the financial system: easy and
reliable control of the financial situation and its evolution; simple
financial organisation; low cost of the administrative operations
involved by its working.
To conclude this brief analysis of financial systems in social
insurance, an attempt may now be made to bring out the nature
and scope of the part played by the actuary in preparing a plan
for the introduction or the reform of a social insurance scheme.
INTRODUCTION
35
The actuary's work may be divided into two stages, though
they cannot always be distinguished clearly. In the first place,
he examines the conditions to be fulfilled by contributions, subsidies,
benefits, and the accumulation of funds, with reference on the one
hand to the special aims and characteristics of social insurance andón the other to data that do not belong exclusively to insurance.
He must take into account a host of financial, economic, social,
and even political considerations and, in particular, the conditions
in which accumulated funds may be invested1, and he must respect
the rules adopted in regard to public finance. The numerical
values of the basic data are selected as judiciously as possible, but
it may also be necessary to consider their stability, for example,
as regards the level of wages and the purchasing power of benefits.
In the second stage of his work, the actuary takes the conditions
and data so defined as part of the terms of the problem to be solved.
With these premises he tries to discover a mechanism suitable to
serve as a basis for the financial organisation. As a rule recourse
is had to an appropriate combination of the classic technical
methods. Lastly, this combination must be adapted to the
numerical data peculiar to the insurance scheme which it is pro^
posed to introduce or reform—that is to say, numerical values
must be calculated for certain basic factors as a function of the
values adopted for the rest.
This brief outline cannot claim to be a survey of all the many
and various tasks to be carried out by the actuary 2, but it brings
out the complexity of his main function. In that connection, two
further remarks may be made, one of them in order to make the
significance of the actuarial calculations clearer and the other to
show the position which the actuary is nearly always led to adopt.
The actuarial calculations call for a number of hypotheses, some
of which necessarily relate to the distant future; the estimates to
which they lead may thus ultimately prove at variance with the
facts. These estimates must therefore be regarded, not as
forecasts, but as the best indications that can be obtained in the
existing uncertainty as to the evolution not only of the insurance
scheme but of the economic and social conditions of the country
as a whole. The trustworthiness of these estimates increases if a
1
2
These considerations are dealt with below. See pp. 37-41.
In particular, the choice of the basic rate of interest, the calculation of
the rate of yield on invested funds, the valuation of investments for the
balance-sheet, and the organisation of statistics raise actuarial problems which
are distinguished from the framing of the financial system itself; they are
discussed later.
36
INTRODUCTION
maximum limit for the probable error is calculated, or if several
successive figures are given, each of them more approximate than
the preceding one but depending on a larger number of hypotheses.
On the other hand, it is often possible and therefore expedient to
calculate a lower or higher limit for the desired result by a rough
approximation, calling only for a small number of hypotheses.
From this point of view the best financial system is not that which
is based on the most successful estimates but that which is sufficiently flexible to allow the financial organisation to be adjusted,
without upsetting its structure, to any transformation of economic
and social conditions.
The second remark to be made is intended to bring out the
position that the actuary must nearly always adopt in tackling
his part of the work of preparing or reforming the financial
organisation of a social insurance scheme. The conditions to be
fulfilled by the fundamental factors of the financial organisation
are not all equally absolute; as a rule it is impossible to realise all
of them at once. Take, for example, the case of an insurance
scheme about to be put into operation. It appears desirable that
the following conditions should be met:
claims to substantial benefits should be allowed without delay
or after only a brief delay,
contribution rates should never reach too high a level, and yet
they should not be too low during the first period of operation;
the participation of the State should not be too burdensome;
the accumulation of reserves should be limited to the minimum.
No solution can satisfy all these requirements at once. If it
approaches some of them, it will inevitably depart from the
others. The actuary is therefore nearly always led either to
propose a compromise not deviating too much from any of the
ends in view, or to indicate several possible solutions, mentioning
their respective advantages and drawbacks and leaving it to the
lawgiver' to choose which he prefers.
IV. — FINANCIAL ADMINISTRATION
The last chapter of each monograph in this volume deals with.
the problems arising out of the investment of accumulated funds
and gives a few brief indications concerning actuarial control,
accounting operations, and the collection and compilation of
statistics.
INTRODUCTION
37
Investment of Accumulated Funds
At the beginning of the working of a pension insurance scheme
some time passes, as a rule several years, before all the income
is absorbed by the expenditure. The result is an accumulation
of funds. These funds constitute on the one hand the technical
reserves and on the other the contingencies, compensation, temporary and special reserves. It has been seen that the amount
that the total technical reserve may reach and the rate at which
they are accumulated are determined by the financial system.
The size of the other reserves differs considerably from one
insurance scheme to another.
The technical reserves, owing to the part they play in the
financial system, must necessarily bear interest. As a rule all the
reserves are invested together. The total constitutes the mass of
accumulated funds, and this mass is invested according to the
principles, rules and methods which will now be analysed. No
account is here taken of the short-term investment of working
capital, consideration being given only to investments proper made
for a medium or long term.
In the foregoing pages it is implicitly assumed that the questions arising out of the investment of social insurance funds
have been solved 1. In particular it is assumed that the technical
reserves bear interest at a rate at least equal to the actuarial
rate and that no loss can be suffered on the amount of the invested
capital. The same questions bear quite a different aspect if the
size of the available funds and the rate at which they are accumulated are taken as data resulting from the financial system chosen,
and if the main problem under consideration is that of the selection
of investments. In this case they go beyond the field of social
insurance proper, and it becomes necessary to examine them in
relation to financial problems, especially as regards their effect on
the capital market, and also in relation to the general economic
and social situation. Owing to the importance óf these questions 2
they have attracted the notice of the International Labour Office,
which, after a preliminary study, submitted them to an international
1
It is obvious that the replies given to these questions for any particular
insurance scheme play an important part in the framing and choice of its
financial system.
2
The investment of capital in life insurance is one of the items on the
agenda of the Twelfth International Congress of Actuaries.
38
INTRODUCTION
committee of experts. This committee held a first meeting in
December 1937 and a second from 5-9 December 1938 and adopted
a series of conclusions, which have been published in a volume in
the same series as the present one 1 , together with the main lessons
to be drawn from the consultation of the experts and the preliminary
work. It will therefore be sufficient to make only a few brief
observations here.
Among all the considerations by which the selection of investments may be determined, it is customary to pick out—somewhat
arbitrarily perhaps—the three general conditions of safety, liquidity
and yield.
The safety of an investment may be regarded, in the first place,
as a contractual matter—that is to say, the clauses of the loan
must be strictly observed in the present and the future; next,
there is the question of real safety—that is to say, of avoiding
or reducing losses in purchasing power, especially in the case of
depreciation of the currency.
Normally, the technical reserves are required to be liquid only
to the extent that the financial system calls for their absorption.
In some cases, however, liquidity can be very useful by facilitating
the transformation of the financial system if in unforeseen circumstances the scheme is suddenly faced with considerable difficulties.
It should, of course, be possible to realise the contingencies reserves
at any time.
Since the income from funds invested as technical reserves
plays an essential part in the maintenance of financial equilibrium,
it is indispensable that the rate of yield on their total should not
fall below the minimum adopted for fixing the rate of interest
which serves as a basis for the calculations. If this condition is
realised, there can be no objection to allowing part of the accumulated funds to bear a lower rate of interest, provided that the
investments have advantages irom other points of,view. It may
in fact be expedient, when selecting investments, to take into
account their social and economic utility as well as the conditions
of safety, liquidity, and yield. In favourable circumstances the
funds of the social insurance scheme may thus help towards
national economic development and, in particular, towards the
1
INTERNATIONAL LABOUR OFFICE: The Investment of the Funds of Social
Insurance Institutions,
Studies and Reports, Series M, No. 16, 1939.
INTRODUCTION
39
improvement of the conditions of life of the insured community,
not to say the national community as a whole.
In all the schemes studied here, it will be seen that the
investment of accumulated funds is governed by a certain number
of legislative provisions supplemented by regulations. In some
cases social insurance funds are treated on the same footing as
other classes of investments for which rules that have stood the
test of time already exist. In general, however, a series of special
provisions are adopted for application to the social insurance
scheme. The regulations generally enumerate :
(1) the classes of investments which are permissible for the
insurance institutions without restriction;
(2) the classes of investments which are permissible for the
insurance institution, provided that their total does not
exceed a certain proportion, fixed in advance, of the value
of the total holding, or that their yield is not less than
a rate fixed in advance (for each class of investment), or
that a special permit is obtained from the supervisory
authority ;
(3) the classes of investments which are compulsory for the
insurance institution up to a certain proportion of the total
value of the holding.
The selection of the investments, made in accordance with the
provisions of laws and regulations, may be entrusted to a central
body or, on the other hand, may be regarded as a prerogative of
the managers of each institution. Both methods have their
advantages and their drawbacks; it will be seen that they can be
applied at the same time, each of them to a part of the funds to
be invested. In some cases the selection is left to the initiative
of the insurance institution, but the rates of yield may not fall
below the minima fixed periodically by the central body. Whatever
method is adopted, it is certain that the selection of investments
is a difficult and responsible task, which cannot be carried out
successfully without extensive knowledge. The decisions concerning investments are rightly considered to be so important that
nearly always representatives of the insured persons and employers
are required to take part in them. In order that a coherent
financial policy may be followed, the body responsible for selecting
40
INTRODUCTION
investments is often led to draw up in advance an investment scheme,
applicable during a specified period unless unforeseen circumstances
intervene. The execution of orders to buy and sell securities may
itself be made subject to supervision or may be compulsorily
entrusted to a national institution.
Each insurance institution must necessarily establish and, as a
rule, publish each year a description of its property and, in particular, of its investments. The tables so drawn up are used to
prepare a series of annual figures, which provide information not
only on the total amount of the funds invested at the end of each
year but also of the distribution of the funds among the different
classes of investments.
The annual return on the assets of an insurance institution is
not in itself sufficient to calculate the rate of yield on investments.
Account must also be taken of repayments of capital, of the gradual
depreciation of real estate, and in some cases of clauses special to
each investment. The rate of yield is calculated for each class
of investment, and especially for the different kinds of bonds,
according to the rules accepted for long-term financial operations,
no modification being made in these rules because the securities
in question are held by social insurance funds.
An average rate of yield having been determined for the whole
holding, it must be ascertained that it is at least equal to the
actuarial rate of interest—that is to say, the rate of interest serving
as a basis for the actuarial calculations. In actual fact, provision
is always made for a safety margin between the two rates. The
choice of the actuarial rate raises a very important, but also very
difficult question which has so far been treated as settled. In
fact, whatever the financial system adopted, it becomes necessary
to admit that the technical reserve should bear interest at a rate
at least equal to the actuarial rate and should do so not only during
a few years but in theory during the whole period covered by the
calculations, not to say indefinitely. This hypothesis, which is
indispensable in all life insurance or invalidity insurance calculations, is not, in fact, as arbitrary as it might seem at first sight.
It is largely justified by the two following observations 1. In the
first place, the yield of that part of the holding which consists
of negotiable securities redeemable at a fixed rate—and this is
:
Cf. H. GALBRUN, op. cit., pp. 124-126.
INTRODUCTION
41
often the largest part—usually undergoes only comparatively
slight and small fluctuations. Secondly, when the insurance scheme
has passed through the initial period of accumulation of reserves,
the amount of the reserves remains stationary or at least varies
very slightly, and in consequence new investments and changes
of investments have only a small effect on the rate of yield. In
other words, the yield displays a certain " inertia ". Further, as
regards social insurance, an adequate rate of yield is all the less
important when the financial system calls for a smaller quantity
of technical reserves. Lastly, provision may be made against losses
of interest by constituting in advance a special reserve for
compensating such losses.
The calculation of the rate of yield is bound up with another
technical problem which has already been mentioned: the determination of the value at which the holding is to appear in the
balance-sheet. Here again social insurance schemes apply all or
some of the various methods employed in private undertakings.
The value at which each investment is recorded on the assets side
of the balance-sheet is obtained by reference to one or more of the
following figures : nominal value, purchase price, market quotation
at a given date, average market quotation during a given period,
actuarial quotation 1. It will be seen later that a great variety
of methods have been adopted in the different insurance schemes.
For the moment it is sufficient to note that one example will be
found of a special fund created to counteract fluctuations in the
quotations of negotiable securities and even of real estate, and
thus to stabilise the value at which investments figure in the
balance-sheet.
Actuarial Accounting and Control
A reference was made in the study of financial systems to the
important part played within each by actuarial accounting and
control. In each monograph an attempt is made to bringo ut
the essential principles on which the accounting of the insurance
institutions are based, and a few brief indications are given as to
1
The actuarial quotation or value of a security at a given date is simply
the present value at that date of all the sums still due to the person holding
the security; for the calculations, use is made either of the yield on the security
under consideration or of the actuarial rate or of a figure obtained from one of
these by the addition of a safety margin.
42
INTRODUCTION
the carrying out of actuarial control, the frequency of such control,
and the publication of the results.
Organisation of Statistics
Among social insurance statistics a distinction may be made
between :
(1) those established regularly in order to record the working
of the scheme;
(2) researches for the purpose of constructing new biometrie
tables (mortality rates, probability of becoming invalid,
cessation of invalidity, etc.) on the basis of observations
made during the working of the scheme itself;
(3) special enquiries undertaken to provide, on any given point,
a more precise basis for the actuarial calculations, and
especially for the actuarial balance-sheet;
(4) special enquiries for studying the expediency and possibility
of introducing administrative reforms.
It should be observed that after several years of working, the
figures collected by an insurance scheme are often of intrinsic
statistical value. In particular, if the scope of the scheme coincides
with one or more occupational groups, the observations recorded
for the insured population form an important contribution to the
demographic study of the occupied population. Conversely, cases
may be found in which the general census forms include a special
question for the purposes of the social insurance scheme. It is
therefore necessary, in organising the statistics of social insurance,
to take into account the connections that it may be expedient if
not indispensable to establish between these statistics and other
statistics compiled in the country.
It has been seen that one of the most important statistical
problems with which insurance institutions have to deal consists
in determining the number of insured persons and their age
distribution. It is necessary to revert to this problem in order
to recall the two principal methods that have been applied—not
without difficulty—for its solution. In some cases, a direct
enumeration is made, based on the records of entries and with. drawals or on the movement of the documents issued to insured
persons for the purpose of the collection of contributions (cards,
INTRODUCTION
43
sheets) or on the inventory of the individual files kept by the institutions (to which are often added perforated cards suitable for
mechanical classification and counting). In other cases, recourse
is had to indirect methods based on the following principle: the
number of daily contributions paid during the " observation
period " appears in the returns of the institutions or is deduced
—when the same rate is applicable to all insured persons in a
group—from the total yield of the contributions. In order to
obtain the insured population the total number of contributions
is divided by the average number of contributions, this last figure
being obtained by means of a partial enquiry.
Either of these methods can be applied to different groups or
sub-groups of the insured population and can thus provide information, in particular, on the distribution by wage classes or by
age groups.
In the following monographs an attempt is made to emphasise
the features special to the statistics established in each scheme
and references are given to the documents in which these statistics
are published.
NOTE ON THE NATIONAL MONOGRAPHS
Each of the following studies is devoted to a single social
insurance scheme; it forms a whole and can therefore be read
separately from the rest of the volume. It is preceded by a
detailed table of contents and concludes with a bibliography
which does not claim to include all the publications relating to
the scheme but only the documents and texts used here. It
seemed neither possible nor very useful to make a general list of
the works and articles dealing with the actuarial technique and
financial organisation of social insurance. Such a list would be
excessively long and would include a great variety of works;
moreover, in most cases the interest of each work mentioned
would be fully evident only when considered with reference to
the particular insurance schemes the author had in mind. When
a study is divided into two parts, there is a separate bibliography
for each. In the text, the bibliographical references are made by
means of figures in square brackets—e.g. [5]—sometimes followed
by a page number—e.g. [5; page 112]. In every case the figures
refer to the bibliography immediately following the monograph
or part of a monograph in which they appear.
44
INTRODUCTION
In each chapter, and often in the same section, a distinction is
made wherever possible between:
(a) the estimates prepared in connection with a proposal for
the introduction of new legislation or for the reform of
existing legislation;
(b) the data which served as a basis, at least during a certain
period, for the working of the insurance scheme;
(c) the experience of the scheme.
The terminology employed in the publications of the International Labour Office on social insurance, especially in the other
volume of this series, is used throughout. On the other hand, no
attempt has been made to standardise the actuarial notation; for
ease of reference it has seemed preferable, except for a few old
memoranda, to retain the symbols adopted in the original
works.
The following is the list of national monographs in alphabetical
order.
Page
BELGIUM: Old-Age and Widows' and Orphans' Insurance for Workers
and for Salaried Employees
Table of Contents and Index of Tables
Text and Tables
Bibliography
47
47
49
81
CZECHO-SLOVAKIA: Invalidity, Old-Age and Widows' and Orphans'
Insurance for Workers
Table of Contents and Index of Tables
Text and Tables
Bibliography
83
83
86
165
FRANCE: General Scheme of Social Insurance
Table of Contents and Index of Tables
Text and Tables
Bibliography
167
167
170
268
GERMANY: Invalidity, Old-Age and Widows' and Orphans' Insurance
for Workers
Table of Contents and Index of Tables
271
271
Part I. — From 1891 to 1914
Text and Tables
Bibliography
277
277
396
INTRODUCTION
45
Page
Part II. — 1924 Onwards
Text and Tables
Bibliography
GREAT BRITAIN AND NORTHERN IRELAND: National Health
399
399
439
Insurance
and Contributory Pensions Scheme
Table of Contents and Index of Tables
Introduction
Part I. — National Health Insurance
Text and Tables
Bibliography
Part II. — Widows', Orphans'and Old-Age Contributory Pensions
Text and Tables
Bibliography
ITALY : General Scheme of Compulsory Insurance against
Old Age and Death
Table of Contents and Index of Tables
Text and Tables
Bibliography
443
443
447
449
449
483
487
487
514
Invalidity,
517
517
519
564
BELGIUM
Old-Age and Widows' and O r p h a n s ' Insurance
for Workers and for Salaried Employees
CONTENTS
Page
INTRODUCTION
•
49
CHAPTER I: Demographic Elements and Experience
1.
2.
3.
Mortality Tables
Insured Population
Statistical Experience
Annual Numbers of Beneficiaries ,
CHAPTER II : Financial Elements and Experience
1.
2.
3.
4.
5.
Contributions
Amount of Contributions in Workers' Scheme
Amount of Contributions in Salaried Employees' Scheme.
Number of Contribution Units
Sundry Receipts
Benefits
Benefits of Workers' Scheme
Benefits of Salaried Employees' Scheme
Experience
State Subsidies
State Subsidies proportionate to Annuities
Additions to Old-Age and Widows' Annuities
Orphans' Allowances
Cost of Administration
CHAPTER I I I : Financial System
1.
2.
Individual Accumulation
Male Insured Persons: Workers aged 18 and over and
Salaried Employees
Male Insured Workers under age 18 and Insured Females .
Insured Females who Insure a Life Annuity for Dependants
General Indications on Accumulation Operations . . . .
Central Funds
51
54
54
55
56
56
56
57
58
58
59
59
60
62
62
63
63
69
70
71
71
71
74
74
77
77
48
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Page
CHAPTER IV: Financial Administration
1.
2.
Investment of Funds
Statutory Provisions. Various Categories of Investment
Authorised
Statistics of the Funds Invested in the Various Categories
by the General Savings and Pension Fund
Financial Results
BIBLIOGRAPHY
80
80
80
80
81
81
INDEX OF TABLES
I.
II.
HI.
IV.
V.
Annual Number of Contributions
Number of Beneficiaries in Receipt of Annuities
Average Joint Contributions
Total Annual Amount of Contributions
Total Amount of Annuities Constituted by Individual Accumulation . . . . *
VI. State Subsidies Proportionate to Annuities Constituted by
Individual Accumulation
VII. State Subsidies: Total Annua! Grants Between 1926 and 1930
m Respect Oi. -LtGn-v^ontriuutory Pensions, ¿vuditums ör
Allowances
VIII. Maximum Rates of State Additions to Annuities
IX. Table for Use in Calculating Annuities Constituted by Individual Accumulation
X. Statement of the Investments of the Pension Fund
55
55
58
59
62
63
64
65
75
81
INTRODUCTION
The old-age and widows' and orphans' insurance schemes, which
apply compulsorily to workers and salaried employees, are based on
Acts of 10 June 1930, 14 July 1930 and 15 December 1937. This
legislation must be regarded not as an innovation, but as the point
which has now been reached in the course of an evolution in which
three main stages are prominent.
In the first period insurance was not yet compulsory and its
development was marked by the following legislative measures:
i. Act of 8 May 1850 establishing the General Pension Fund;
2. Parliamentary resolution granting, as from 1891 and within the
limits of the credit voted each year, bonuses to persons insured
with the General Pension Fund;
3. Act of 10 May 1900 establishing a scheme of voluntary insurance
subsidised by the State;
4. Act of 20 August 1920 granting a non-contributory pension to
all persons aged at least 65 whose means are below a prescribed
level.
The second phase is characterised by the introduction of compulsory
schemes and by the addition of widows' and orphans' insurance. The
insurance schemes for workers and for salaried employees were governed
by the Acts of 10 December 1924 and 10 March 1925 respectively, which
came into force on 1 January 1926 and Î January 1927 *.
The third stage began with the reorganisation of the compulsory
schemes—that of the workers by the Act of 14 July 1930 (in force
1 January 1931) and that of the salaried employees by the Act of 18 June
1930 (in force 1 January 1932). These measures were completed by
the Act of 15 December 1937, the various parts of which became operative
on 1 July 1937, 1 October 1937 and 1 January 1938. The following
chapters deal almost exclusively with this stage.
The two schemes of compulsory insurance against old age and death
covering workers and salaried employees are very much alike. The
method of individual accumulation, according to which the contributions
paid give rise to annuities which vary with the duration of insurance,
is identical in both schemes apart from some differences of secondary
importance. The two schemes also have in common the non-contri1
The Act of 10 March 1925 aroused numerous protests, even before it came
into force and was never applied except partially; an immediate revision was
undertaken, the contributions were reduced and it was decided that they
should be paid provisionally to the General Pension Fund, there to be accumulated in individual accounts under the provisions of the Act of 10 December
1924.
50
ACTUARIAL TECHNIQUE
AND FINANCIAL
ORGANISATION
butory additions granted to insured persons of the transitional period,
i.e. those born before 1 January 1908. The two financial systems are
so closely linked together that very often the statistics do not give
separate figures for each scheme, but only totals for the two together.
Accordingly, a simultaneous analysis, in a single monograph, has been
undertaken of the financial organisation and technique of both the
workers' and the salaried employees' schemes.
CHAPTER I
DEMOGRAPHIC ELEMENTS AND EXPERIENCE
§ 1. — Mortality Tables
The Belgian table F. 1904 was first resorted to for both sexes and
for all categories of insured persons.
This table, for females, was constructed at the same time as two
others for males and for both sexes respectively, by the Actuarial
Department of the General Savings and Pension Fund. The three
tables were published in a special pamphlet [5] together with details
of the data and the methods of construction employed.
The statistical data comprised:
(1) The results of the general censuses of the Belgian population
for 1880, 1890 and 1900.
(2) Statistics of deaths, according to age, for each of the years 1892,
1893 to 1901.
(3) Statistics of births during the period 1891-1900.
In the absence of migration statistics according to age, no account
was taken of migratory movements : the Belgian population is considered
as a " closed group ". It should be mentioned also that the death
statistics include all deaths occurring in the country, while the census
data refer only to persons having their residence in Belgium.
The probability of death at age x is calculated by an approximate
formula deduced from the formula of Zeuner and Knapp:
1891, 1900.-
PX =
. . , , , .
.
1
1892, 1901 j
1-1
^x + 77
2" '
1891, 1900T
.
.
1893, 1901 j
a
x
1891, 190OT
m which the two condensed expressions
fined as follows:
First
1891, 1900
ft=10
^ n
^x = 2u
Lx ,
1890 + ftT
x
1892, 1901
7
.
dx are de-
52
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
and the approximate value of the expression is obtained from the results
of the three general censuses of 1880, 1890 and 1900 by means of graphic
interpolation of the second order, which, using Woolhouse's formula.
gives :
1891 190
' °L:c = 6.15
1 8
% -f 4.675
19
°°L, -
0.825
im
Lx
.
(where *LX represents the number of persons aged over x but under x + 1
at 31 December in year t).
Further
1882,1901,
ft=n
^ t
1890 +
fe,
ft=2
' where im+kdx represents the number of deaths during year 1890+Ä of
persons aged over x but under x -f- 1.
The probabilities of death for the first years of life are determined
by the use of special formulae resulting from an approximation analogous
to that which produced the general formula, viz:
?0 =
d„
N '
_
q i =
d,
W=J0 '
?a =
d2
N-d0-¿; '
etC
''
where N represents the mean annual number of births.
The results obtained from these formulae merge with those obtained
from the general formula as from age 4 or 5.
After the crude rates had been calculated they were graduated by
an analytical method based on Makeham's formula. The 72 equations
corresponding to the integral ages from 20 to 91 aie divided into three
groups, each covering 24 consecutive years. If the equations of each
group are added together there remain only three equations and these
will fix three of the constants of Makeham's law. Also the graduated
and the crude values can be equated at age 20, so that the crude curve
and the graduated curve have at least four points in common, corresponding to ages 20, 44, 68, 92. Below age 20 the table cannot be graduated by Makeham's law, but its progression was so regular that it
did not seem necessary to graduate it. It was simply adjusted to the curve
for higher ages at age 20 by fixing a suitable value for the fourth constant
of Makeham's law.
The table produced in this manner for females has been used for all
the annuity calculations in the schemes of insurance against old age and
death (both compulsory and voluntary) whatever the sex, age and
occupation of the insured person.
In 1939 it was decided to substitute a more recent table (F. 1928-1932)
for mortality table F. 1904 where the rates for females (insurance schemes
for workers and salaried employees) and the rates for workers aged
under 18 were concerned.
The 1928-1932 tables were constructed [6] from the following statistical
data:
(1) The results of the general census of 31 December 1930 (age
distribution of the population resident in Belgium):
53
BELGIUM
(2) The distribution of actual deaths (i.e. including deaths of aliens
resident in Belgium) by:
(a) age at death for the years 1928, 1929, 1930;
(b) age at death and year of birth for the years 1931, 1932.
(3) The annual numbers of emigrants and immigrants.
The following formula, derived from Zeuner and Knapp's formula,
was used:
A
¡ = 1932
"
:
(=1932
2J
(=1928
(=1929
A (=1930
L
X+ — ^
(=1932
dx + ^
•" (=1928
A ( = 1932
t_xdx
(=1931
7 ^
A (=1933
' - À + "7 ^ j
* i = 1928
*
t-x-Jx
(=1929
where Lx represents the number of persons aged over x but under x + 1
at 31 December in year t;
dx the number of deaths during year t of persons aged over x but
under x + 1 ;
t_xdx the number, of deaths during year t of persons aged over x but
under x + 1 who were born during year t — x ;
t_xix the excess of immigrants over emigrants during year t in the
case of persons who were born during year t — x (it being assumed
that the age distribution of the excess of emigrants over immigrants
corresponded to that of the alien population recorded at the census of
31 December 1930).
An analogous formula was used for the first year of life:
(=1932
0.65
1928
iZ0 + 2
^» + "32^0
(=1928
( = 1932
A (=1932
(=1932
( = 1928
* ( = 1928
( = 1928
where hN represents the number of births during year t, assuming that
65 per cent, of the deaths between ages 0 and 1 relate to births of that
year.
The crude table so obtained was adjusted:
(1) for ages 24 and over, by means of Makeham's formula, using
King and Hardy's method;
(2) for ages under 24, by means of graphic interpolation.
54
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
§ 2. — Insured Population
The insurance of workers covered, under the Act of 14 July 1930, two
categories of compulsorily insured persons, defined as follows.
The first category, that of wage earners, includes all workers of both
sexes aged at least 14, provided that they are employed in Belgium or
abroad in the service of an employer and in the employment of an
undertaking with its head office established in Belgium. There is no
limit fixed to the amount of remuneration.
The obligation to insure applies, not only to wage earners in commerce,
industry and agriculture, but also to domestic servants. The following
are excepted: miners and seamen (who are covered by special schemes),
and persons employed by public authorities, provided that they are
entitled to pension by virtue of their employment.
The second category, that of independent workers, includes any person
performing manual or intellectual labour on his own account who is
thereby subject to the professional tax and whose professional income
does not exceed 18,000 francs per annum. This category was transferred
to voluntary insurance by the Act of 15 December 1937.
Under the Act of 18 June 1930, the following are subject to the
insurance scheme for salaried employees:
(1) salaried employees of both sexes, of Belgian nationality, who
are employed and paid in Belgium or abroad, by a Belgian firm
or by a brarch of a foreign firm established in Belgium;
(2) salaried employees of both sexes, of foreign nationality, who are
employed and paid in Belgium by a Belgian firm or by a branch
of a foreign firm established in Belgium;
(3) salaried employees of both sexes in the service of the State, the
provinces and the communes, public i istitutions and public
utility companies, whose terms of service do not provide for an
old-age pension, a widow's pension and an allowance to orphans
aged under 18;
(4) the following classes are assimilated to salaried employees:
(a) professional journalists; (b) members of the teaching staff
attached to a private educational establishment who are not
covered by the teachers' pension laws; (c) persons who carry
on in Belgium the profession of lyric or dramatic artist or
instrumentalist under a business contract which is binding for at
least a month.
Provision is also made for voluntary insurance attached to the workers'
insurance scheme and for. " continued insurance " and voluntary
insurance in conjunction with the salaried employees' insurance scheme.
STATISTICAL
EXPERIENCE
The number of individual accounts is no clear indication of the insured
population. Each insured person may have opened in his name, in fact,
several accounts appearing in different categories: workers, salaried
employees, optional payments, or voluntarily insured persons. Moreover, in the course of each accounting period a number of accounts
55
BELGIUM
entail no financial operation. More informative are the numbers of
annual contributions for each category as shown in table I.
TABLE I . —
ANNUAL NUMBER
OF
CONTRIBUTIONS
(in thousands)
Year
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
. . . .
x
.
.
.
.
2
.
.
.
.
Workers' insurance
Optional
Voluntary
Compulsory ofcontributions
compulsorily
insurance
insurance
insured
persons
41
1,276
419
1,358
39
447
1,414
36
455
1,431
34
468
1,391
31
592
1,285
546
25
1,296
20
475
1,305
15
384
1,348
14
338
317
1,451
14
1,553
13
319
employees'
insurance
199
205
230
240
438
235
221
224
225
238
252
i T h a t is, for workers, a total of 1,856,000 contributions, viz. 1,076,000 for males and
780,000 for females.
2 T h a t is, for workers, a total of 1,791,000 contributions, viz. 1,088,000 for males and
703,000 for females.
§ 3. — Annual Numbers of Beneficiaries
The portion of the old-age pension or widow's pension which is
related to the accumulation of the contributions paid (old-age annuity
or widow's annuity) is subject to no qualifying period. On the other
hand the payment of additions and allowances the cost of which is borne
by the State is subject to a complex system 1of conditions as to contributions and needs which will analysed later .
The figures of the number of beneficiaries given in the following table
relate to the portions of pension constituted by accumulation, and are
obtained by counting the number of " annuity orders " current at the
end of each year.
TABLE
NUMBER OF B E N E F I C I A R I E S IN R E C E I P T OF
II.
ANNUITIES
(in thousands)
At the end of year
19321
1933
1934
1935
1936
1937
.
.
.
.
.
. .
. .
. .
. .
. .
. .
.
.
.
.
.
.
Workers' insurance
Old-age '
Widows'
annuities
annuities
135
33
158
35
191
51
222
60
246
68
289
88
Salaried employees' insurance
Old-age
Widows'
annuities
annuities
0.9
0.6
2.4
1.4
4.1
2.3
4.9
3.3
7.9
4.4
9.7
5.5
i Figures before 1932 do not distinguish between workers' insurance and
employees' insurance.
i See Chapter II, 4, pp. 62-70.
salaried
CHAPTER II
FINANCIAL ELEMENTS AND EXPERIENCE
§ 1. — Contributions
AMOUNT OF CONTRIBUTIONS IN WORKERS' SCHEME
The wage earners are divided into eight classes, to each of which there
corresponds a rate of contribution fixed in accordance with the following
scale, irrespective of sex:
• Amount, of weekly
wage
(francs)
Class
I
n
in
IV
v
VI
VII
VIII
.
U n d e r 50
50.01-75
75.01-100
100.01-125
125.01-150
150.01-175
175.01-200
Over 200
Amount of
the monthly
joint
contribution
(francs)
5
7
10
13
16
19
22
25
The contribution of the insured person, which is equal to that of
the employer, is fixed monthly on the basis of the wage at the rate
represented by the first payment to the insured person in the current
month.
Independent workers who, under the Act of 14 July 1930, constituted
a second category of insured persons, were required to contribute on
the basis of their professional income in the previous year.
Before the contributions are credited to the individual accounts
opened with the Pension Fund there is deducted, in the case of all male
persons born before 1908, a levy for the benefit of the Widows' and
Orphans' Fund 1.
These deductions were fixed formerly at:
(«) 10 francs per annum for male insured persons born before 1 January
1888;
(b) 5 francs per annum for male insured persons born between 1 January
1888 and 31 December 1907.
1
The purpose and the function of this Fund are indicated below, p. 77.
BELGIUM
57
As from 1 October 1937 these rates were reduced as follows:
(a)
(A)
(a)
(b)
where t h e annual amount of t h e contributions is less t h a n 60 francs
and equal to or greater t h a n 30 francs:
5 francs per annum for male insured persons born before 1 January
1888;
2 francs per annum for male insured persons born between 1 January
1888 and 31 December 1907;
where t h e annual amount of the contributions is less t h a n 30
francs:
2 francs per annum for male insured persons born before 1 January
1888;
1 franc per annum for male insured persons born between 1 January
1888 and 31 December 1907.
Since 1 July 1937 every worker over 21 is required to p a y 5 francs
for each complete month of unemployment or sickness.
AMOUNT OF CONTPIBUTIONS IN SALARIED E M P L O Y E E S ' SCHEME
The Act makes a distinction between two kinds of contribution, one
going to the insurance institutions to accumulate in a personal account,
the other serving to maintain t h e Salaried Employees' Allowances Fund.
(a)
Contributions
paid to Insurance
Institutions
The amount of t h e contributions paid to the insurance institutions
is fixed in proportion to salaries, t h e m a x i m u m remuneration taken
into account for this purpose being 18,000 francs a year.
The employee's contribution is fixed at 3 per cent, of his remuneration.
The employer's contribution is fixed at t h e following proportions of t h e
same remuneration:
Until
From
From
From
(b)
1960
1961 to 1975
1976 to 1990
1 January 1991 onwards . . . .
Contributions
paid to Salaried
4 per cent.
4i/ 3 „
4% „
„
5
„
„
Employees'1 Allowances
Fund
Only salaried employees b o m before 1 J a n u a r y 1895, for whose
benefit the Salaried Employees' Allowances F u n d is established, contribute to this Fund.
The amount of the annual contribution is fixed according to t h e
following t a b l e :
Date of birth, of insured person
Before 1 January 1875
From 1875 to 1879
„ 1880 „ 1884
„
1885 „ 1889
„ 1890 „ 1894
Francs
90
75
60
45
30
All employers must p a y to t h e Salaried Employees' Allowances Fund
an annual contribution, amounting t o :
120 francs until 1960,
80 francs from 1961 to 1975,
40 francs from 1976 to 1990,
58
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
in respect of each insured person employed on 31 December of the current
year. When an insured person is employed on 31 December by several
employers, each employer must make the payment specified above,
except in the case of an employee earning less than 3,600 francs, in
which case the contribution is reduced by a half.
NUMBER OF CONTRIBUTION UNITS
The numbers of annual payments for each category of insured persons
are given in table I above '.
The mean values of the annual payments given below have been
obtained by dividing the total amount of joint contributions by the
number of annual payments, but in the case of salaried employees the
figures relating to 1932 onwards have been calculated by reference to
the monthly payments.
TABLE I I I . —
Year
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
AVERAGE
JOINT
Workers'
insurance
Average
annual
contribution
(francs)
CONTRIBUTIONS
Salaried employees'
insurance
Average
Average
annual
monthly
contribution
contribution
(francs)
(francs)
48
47
47
49
66
152
157
151
146
154
164
597
674
713
775
671
75
78
78
77
78
82
..
Table IV gives in round figures the total annual amount of joint
contributions for each category. In considering these figures it should
be noted that, up to 1 January 1932, the voluntary contributions
of salaried employees are included with those of the workers under
the heading " voluntary insurance ".
§ 2. — Sundry Receipts
Each of the two insurance schemes receives either the total or only a
part 2 of the capital sums accumulated for the purpose of a widow's
pension whenever a male insured person dies a bachelor, widower, or
divorced. The amounts credited under this head are paid over definitively, at the death of the insured, either to the Widows' and Orphans'
Fund for workers or to the Salaried Employees' Allowances Fund.
1
2
See p. 55.
See pp. 72-74.
59
BELGIUM
TABLE IV.
TOTAL ANNUAL AMOUNT OF
CONTRIBUTIONS
(in thousands of francs)
Workers' insurance
Year
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
. . . .
. . .
Salaried employees' insurance
Optional
contribuCompulsory tions of
Voluntary
insurance corapulsorily insurance
insured
persons
60,679
63,908
67,116
70,194
92,158
195,680
203,417
197,570
196,271
223,187
255,337
1,074
9.85
1,037
984
1,229
1,234
1,209
765
655
638
674
11,224
13,072
13,904
14,776
23,131
37,707
33.308
27,397
24,131
23,267
24,331
Compulsory Salaried
and
employees'
voluntary allowances
insurance
fund
119,000
138,000
164,000
186,000
294,000
210,598
208,099
208.881
208,442
222,015
248,936'
•
—
—
—
—
28,855
29,311
31,186
30,844
32,712
33,300
§ 3. — Benefits
In this section are described the benefits of the workers' and salaried
employees' schemes ; the next section deals with the additions to old-age
and widows' annuities and the orphans' allowances, the cost of which
is borne entirely by the State.
BENEFITS OF WORKERS' SCHEME
The pensionable age is fixed, at the option of the insured person, for
males, at any birthday between the 60th and the 65th; for females, at
any birthday between the 55th and the 65th.
The old-age annuity includes (a) a retiring annuity corresponding to
the amount shown in the personal account of the insured person and (b)
a proportionate State subsidy equal to 50 per cent, of this retiring annuity
with a maximum of 1,200 francs a year (this maximum being reduced
if the pension commences before 65)1.
The amount of the widow's annuity is assessed:
(1) by taking a varying percentage of the retiring annuity corresponding to the amount shown in the personal account of the husband
at the date of his death;
(2) by increasing the amount so obtained by 50 per cent, in respect
of the proportionate State subsidy1.
1
These State subsidies, proportionate to the old-age or widow's annuity,
are granted to foreigners only if a treaty of equality of treatment has been
concluded with their country of origin. For insured persons born between
1867 and 1884 the proportion may exceed 50 per cent, (see p. 63) and for
the oldest of these it may reach 100 per cent.
60
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
If husband and wife are the same age, the varying percentage mentioned above depends only on the age of the husband at death, in accordance with the following scale:
Percentage (hx)
for assessing
widow's annuity
(husband and wife
of the same age)
Less t h a n 41
35
41
36
42
37
43
38
44
39
45
40
46
r
41
47
.,,...
42
48
43
49
44
50
45 .
51
46
52
47
53
48
54
49
1
55 and o v e r
50
1
The percentage remains fixed at 50 when the insured person dies after having entered
upon his old-age pension.
Age of husband at death
If husband and wife arc of different ages, these proportions must be
multiplied by a conversion factor: in this case the amount of the widow's
annuity is obtained by two successive operations:
(1) calculation of the widow's annuity that would have been payable
if husband and wife had been of the same age ;
(2) conversion of this annuity by means of the coefficients from two
scales [7] dependent on the age of the husband at death and the
difference in ages (to the nearest integral number of years).
The application of the first scale reduces the annuity when the wife is
younger than the husband, while the second on the other hand increases
the annuity when the wife is older than the husband x.
The contributions credited to the personal account of a female insured
person are in principle applied entirely to the purchase of a retiring
annuity, but a part of these contributions may, at the request of the
insured, be reserved for the purpose of providing at her death a life
annuity for certain persons named in advance. This life annuity becomes payable only if the death of the insured occurs before entering
on the old-age pension.
A lump-sum death benefit is payable, when the insured person dies
without leaving a widow, either to his children aged less than 16 or
to his parents.
BENEFITS OF SALARIED EMPLOYEES' SCHEME
The pensionable age is fixed, at the option of the insured, for males
at any birthday between the 55th and 65th, and for females between
the 50th and 60th.
1
So t h a t the p r e s e n t value r e m a i n s t h e s a m e : see below Chapter I I I , 1,
p . 72.
BELGIUM
61
The old-age annuity and the widow's annuity are composed, in accordance with the same rules as in the workers' scheme, of two portions
derived respectively from the accumulation of contributions and the
proportionate State subsidy.
Under the same conditions as in the workers' scheme, part of the
contributions credited to the personal account of a female insured person
may, at her request, be reserved for the purpose of providing a life
annuity for persons named in advance, such life annuity becoming
payable only in the event of the death of the insured before entering
on the old-age pension.
A lump-sum death benefit is paid to children, parents or other persons
named in advance, when the insured dies without leaving a widow
(except in the case where the insured dies after having entered on his
old-age pension and after having used his option of converting the lumpsum death benefit corresponding to his contributions into a life annuity
for himself).
Besides the benefit payments just enumerated, which correspond to
the payments under the workers' scheme, the Salaried Employees'
Allowances Fund provides for the following allowances:
(a) Old-age allowances granted to male insured persons who have
attained age 65 and females who have attained age 60, where the following conditions are fulfilled:
(i) The insured was born before 1 January 1895;
(ii) The insured was born after 31 December 1861, for males, or after
31 December 1866, for females;
(iii) The insured has paid statutory contributions as from 1 January
1926, or from the date when the law applied to him, whichever
is the later;
;
(iv) The insured has made all the statutory payments to the Salaried
Employees Allowances Fund as from 1 January 1932, or from
the date when the law applied to him, whichever is the later
(if all the payments have not been made, the allowance is proportionately reduced).
The annual amount of these allowances varies, according to the year
of birth of the insured, between 200 and 1,500 francs for men and
between 130 and 770 francs for women.
An insured person who opts to draw his annuity before the limiting
age (65 for men and 60 for women) may obtain a reduced allowance, but
no such allowance will be granted if the pensioned person is still working
for an employer.
(b) Widows' allowances granted approximately under the same
conditions as old-age allowances, viz:
(i) The husband must have been born after 31 December 1861,
and before 1 January. 1895;
(ii) The husband must have paid statutory contributions as from
1 January 1926, or from the date when the law applied to him,
whichever is the later;
(iii) The husband must have made all the statutory payments to
the Salaried Employees' Allowances Fund as from 1 January
1932, or from the date when the law applied to him, whichever
is the later.
The amount of the widow's allowance is derived from the
old-age allowance to which her husband would have been
62
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
entitled at age 65 by applying on the one hand the percentages
used in calculating widows' annuities 1 , and on the other hand,
to take account of differences of age between husband and
wife, special scales fixed by Royal Order.
(c) Orphans' allowances, payable to the surviving parent or, after
the death of both parents, to the person in charge of the orphan, of
300 francs per annum for each child aged less than 18.
(d) Invalidity allowances insuring 1,500 francs a year for permanent
total invalidity (until the coining into force of a compulsory invalidity
insurance scheme).
EXPERIENCE
The following table shows the sums paid by way of annuities constituted by individual accumulation:
TABLE V. —
TOTAL AMOUNT OF A N N U I T I E S CONSTITUTED BY I N D I V I D U A L
ACCUMULATION
(in thousands of francs)
Workers' insurance
Current at the end
of the year
19321
1933
1934
1935
1936
1937
. . . .
Salaried employees"' insurance
For insured
pensions
(old-age)
For widows
For insured
pensions
(old-age)
6,557
7,460
11,023
14,174
17,560
15,744
1,445
1,691
4,142
5,296
6,535
14,279
124
496
1,055
1,890
2,837
3,948
For widows
521
1,327
2,134
2,903
3,903 •
4,928
i Returns before 1932 do not distinguish between workers and salaried employees.
§ 4. — State Subsidies
State grants are made on behalf of workers and salaried employees
in accordance with regulations laid down in the legislation governing
the workers' insurance scheme, which automatically extends to salaried
employees' insurance. Such grants are intended to cover expenditure
incurred under three heads:
(a) The subsidies proportionate to annuities constituted by individual
accumulation;
(6) The additions to old-age and widows' annuities;
(e) Orphans' allowances.
1
See above, pp. 59-60.
63
BELGIUM
STATE SUBSIDIES PROPORTIONATE TO ANNUITIES
The payment under this head has already been described in the
preceding section. Normally it is fixed at 50 per cent, of the retiring
annuity or of that part of the widows' annuity which is constituted
by individual accumulation, subject to prescribed maxima (e.g. 1,200
francs per annum in the case of a pension commencing at age 65).
In the case of certain " transitional " insured persons the State subsidy
under the same conditions is increased to the following percentages
(subject to the same maxima):
100 per cent, for insured persons born between 1867 and 1874.
75 „ „
„
„
„
„
„
1875 and 1879.
60 „ „
„
„
„
„
„
1880 and 1884.
The following table shows the annual charge falling on the State in
respect of payments under this head:
TABLE VI. — STATE SUBSIDIES PROPORTIONATE TO ANNUITIES
CONSTITUTED BY INDIVIDUAL ACCUMULATION
(in thousands of francs)
Workers' insurance
Year
1932l
1933
1934
1935
1936
1937
1
. . . .
For insured
pensions
(old-age)
1,186
1,909
3,168
4,620
6,438
10,784
Salaried employees' insurance
For widows
For insured
pensions
(old-age)
For widows
976
1,557
2,264
2,618
3,233
5,243
486
1,236
1,965
3,253
4,723
5,908
377
744
1,661
1,760
2,222
2,662
Returns before Í932 do not distinguish between workers and salaried employees.
ADDITIONS TO OLD-AGE AND WIDOWS' ANNUITIES
The additions to old-age and widows' annuities form a complicated
system which is common to both insurance schemes. This system was
introduced by the Act of 14 July 1930 in substitution for previous
provisions, which granted:
(1) A non-contributory pension under the Act of 20 August 1920;
(2) An addition to old-age and widows' annuities under the Act of
10 December 1924;
(3) A non-contributory old-age allowance under the Act of 10 December 1924;
(4) Supplementary non-contributory pensions, supplementary additions to old-age annuities and supplementary non-contributory
old-age allowances, under the Acts of 20 Julv 1927 and 2 April
1929.
64
ACTUARIAL T E C H N I Q U E
AND ' FINANCIAL
ORGANISATION
The following table shows the State grants made between 1926 and
1930 jointly to the workers' and salaried employers' insurance schemes
to cover the charges in respect of the items mentioned above.
TABLE V I I . — STATE S U B S I D I E S : TOTAL ANNUAL GRANTS B E T W E E N
AND 1 9 3 0 IN RESPECT O F NON-CONTRIBUTORY P E N S I O N S ,
A D D I T I O N S OR ALLOWANCES
1926
(in thousands of francs)
Non-contributory pensions
Additions to old-age annuities
Additions to widows' annuities
Non-contributory old-age
allowances
Supplementary non-contributory pensions . .
Supplementary additions
to old-age annuities .
Supplementary non-contributory old-aee allow-
1926
1927
1928
1929
1930
194,119
197,293
196,789
200,006
18.5,573
—
—
46
1,416
515
1,699
2,924
4,610
174
2,281
5,319
157,461
135,755
9,555
18.693
1,187
3,141
—
—
—
130,260
116,399
—
—
—
—
•
17,583 ' 32,429
The State payments which were gradually introduced into the scheme
from 1920 to 1930 were all intended to protect the " transitional "
insured persons, who under the application of the normal rules alone
would obtain insufficient pensions. With the same object in view the
1930 Acts reduced the categories of payments to two—additions to
old-age annuities and additions to widows' annuities. After 1930 the
method of granting these two additions was frequently modified1
before being thoroughly amended by the Act of 15 December 1937.
Provisions in force 1931-1937
Under the system of State additions to annuities in force from-1931
to 1937, " transitional " pensioners were divided into four categories,
according as their date of birth was:
1. Before 1
2. In 1863,
3. Between
4. Between
January 1863;
1864 or 1865; 1866 and 1870 inclusive:
1871 and 1907 inclusive.
The payment of these additions was subject to the fulfilment of
conditions in respect of contributions and of need which became more
stringent as the date of birth grew later. The Act of 1930 fixed a
maximum scale depending on the date of birth of the beneficiary,
which is given below.
1
Under the Acts of 23 July 1932,17 May 1933 and 31 July 1934, and numerous Royal Orders.
65
BELGIUM
TABLE VIII. —
MAXIMUM RATES OF STATE
TO ANNUITIES
ADDITIONS
Additions to old-age
annuities
Year of birth, of insured person
j
1868
1869
1870
1871
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
...-
.
. . .
. . . .
-
Additions
Married
male
insured
persons
3,200
3,200
3,100
3,100
3,000
3,000
2,900
2,900
2,800
2,700
2,600
2,600
2,600
2,500
2,400
2,400
2,300
2,300
2,200
2,100
2,000
1,900
1,800
1,800
1,700
1,600
1,500
1,400
1,300
1,200
1,100
900
800
700
600
500
400
300
200
100
Other
beneficiaries
2,100
2,100
2,000
2,000
1,900
1,900
1,800
1,800
1,700
1,600
1,500
1,500
1,500
1,400
1,300
1,300
1,200
1,200
1,100
1,000
900
800
700
700
600
500
400
300
200
100
to widows'
annuities
540
540
540
540
540
480
480
480
480
480
420
420
420
420
420
360
360
360
360
360
300
300
300
300
300
240
240
240
240
240
180
180
180
180
180
120
120
120
120
120
The above rates underwent a temporary cut of 5 per cent, during the
period 1 July 1933-30 November 1936.
They were payable only if all the statutory contributions had been
made. j Where this was not the case, the addition was reduced in the
ratio of the number of contributions paid to the number which should
have been paid, but no addition was granted if the insured person had
not paid half the statutory contributions.
On the basis of the table of maxima reproduced above, the amount
5
r
66
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
of the addition was calculated from schedules * graduated according to
the means of the beneficiary.
The choice of the schedule to be used in any particular case depended
upon
1. The category to which the beneficiary belonged (unmarried,
widowed, or divorced persons living alone or in institutions at
the public expense; married men; wives who are sole beneficiaries; unmarried, widowed or divorced persons living with other
claimants or in institutions not at the public expense);
2. Year of birth;
3. Contributions paid.
With a view to applying the schedules for assessing the benefit
payable according to the means of the beneficiary, it is necessary to
define precisely the resources which must be taken into account, the
method of calculating the income and the conditions under which
certain items are to be disregarded. The statutory rules on these points
and the numerous amendments which have been made to them are not
relevant to a technical consideration of the financial organisation of
the scheme and do not lend themselves to the drawing up, of estimates.
It may however be remarked that they can nevertheless exert an appreciable influence both on the practical bearing and on the financial equilibrium of the insurance scheme.
experience
Under the scheme introduced by the 1930 Acts, the total amounts
paid under the heading of additions to old-age annuities, for the workers'
and salaried employees' schemes combined, were as follows:
519,814 thousand francs in 1931
989,146
„
„
„ 1932
1933
714,202
1934
439,215
1935
499,144
1936
494,261
The total amounts paid under the heading of additions to widows'
annuities, for the two schemes, were:
10,122 thousand francs in 1931
16,816
„
„
„ 1932
20,532
1933
30,024
1934
1935
27,989
1936
26,268
Measures introduced by the Act of 15 December 1937
As from 1 October 1937, under the Act of 15 December 1937, the
grant of additions to annuities is subject to new rules, the most important
of which from a financial point of view are as follows.
Additions to old-age annuities without means test
Additions to old-age annuities are granted without a means test, at
or after the age of 65 years, to insured men, and to insured women who
These schedules were amended by several Royal Orders.
BELGIUM
67
are unmarried, widowed, divorced or under a judicial separation,
provided such persons were born on or after 1 January 1867 and that
the contributions indicated below have been made on their behalf, as
employed, unemployed or sick persons, from the age of 51 to that of
65 years. Nevertheless, no contribution is required in respect of any
period before 1 January 1926.
The conditions relating to contributions mentioned above are considered as fulfilled if, between the ages of 51 and 63, there was only one
break in payment, as follows:
1. One year at the most for insured persons born in the years 18701874 inclusive;
2. Two years at the most for insured persons born in the years 18751879 inclusive;
3. Three years at the most for insured persons born on or after
1 January 1880.
Payments made under the special Acts relating to old-age and widows'
and orphans' insurance for salaried employees, mine workers and seamen
are included for determination of contributions as indicated above.
Payments made as voluntarily insured persons, in Belgium, by
employed persons who were at the same time paying contributions under
the legislation of a country party to a reciprocity agreement with Belgium
are also taken into account.
As regards persons compulsorily insured under the Act relating to
old-age and widows' and orphans' insurance for salaried employees,
only those insured persons whose annual average salary during the
five years preceding their sixty-fifth birthday did not exceed 21,000 francs
may receive additions to annuities without a means test.
An addition is also payable at the age of 65 years, without a means
test, to the widow of an insured person who also received the addition,
provided such widow has made, as a voluntarily insured person, the
payments required of persons of her age and provided the marriage
was contracted before the husband reached the age of 60.
Each insured person, and his (her) spouse if any, must sign an undertaking definitively to stop all occupational activity on applying for the
grant of an addition payable without means test, whatever is the age
of the spouse at that time.
In order that payment of contributions shall not be considered as
interrupted for application of the above conditions, at least nine monthly
contributions, with a total not inferior to 50 francs, must have been
paid each year. Nevertheless this condition is regarded as fulfilled if:
1. As regards the period 1 January 1926-31 December 1931, contributions have been paid totalling 72 francs for males or 24 francs
for females;
2. As regards the year 1931-32, a contribution has been paid of
50 francs for males or 24 francs for females;
3. As regards each of the insurance years 1932-33, 1933-34, 1934-35,
1935-36, 1936-37, 1937-38, 1938-39, a contribution of at least
50 francs has been paid.
Additions to old-age annuities with means test
An employed person who has not fulfilled the conditions required
for entitlement to an addition to an old-age annuity without means test
may become entitled to this addition on the following conditions.
68
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
The maximum addition (see table VIII) is granted when the insured
person's means, together with those of his (her) spouse if any, are not
above 2,800 francs for a married insured person or 1,900 francs for an
insured person who is unmarried, widowed, divorced or under a judicial
separation. If the total means exceed the above figures, the addition is
equal to the difference between the maximum appropriate to the insured
person and the part of his (her) means exceeding 2,800 or 1,900 francs
as the case may be.
There are exact rules governing the determination of that part of the
applicant's means which must be taken into account for grant or calculation of the addition; but such rules do not fall within the scope of
this volume and will therefore not be examined here.
A person born before 1 January 1867 may'receive an addition to his
old-age annuity after a means test and provided the following contributions have been paid on his behalf:
1.
2.
3.
For persons born before 1 January 1863, no payment required;
For persons born in 1863, 1864 or 1865, any payment;
For persons born in 1866, a payment of 108 francs for males or
36 francs for females.
The maximum addition which may be granted is fixed at 3,200 francs
if the applicant is a married man, and 2,100 francs if the applicant is
unmarried, widowed, divorced or under a judicial separation.
A person born in 1863, 1864 or 1865 who has made no payment at all.
or a person born in 1866 who has made payments amounting to less than
108 francs but not less than 54 francs (insured man) or to less than
36 francs (insured woman), may claim an addition to his old-age
annuity not exceeding 2,900 francs if the applicant is a married man or
1,900 francs if the applicant is unmarried, widowed, divorced or under
a judicial separation.
No addition to an old-age pension is granted to insured persons born
in 1866 by or on behalf of whom a contribution of at least 54 francs
(insured men) or 18 francs (insured women) has not been paid.
For insured persons born on or after 1 January 1867 who have not
made all the payments required for grants of the maximum addition,
the annual amount of the addition is reduced by the following amounts
for each missing or insufficient annual contribution:
300 francs for married men; 200 francs for insured persons who are
unmarried, widowed, divorced or under a judicial separation; 150 francs
for married women.
If the number of annual payments made amounts to less than half the
number which the insured person ought to have made no addition is
allowed.
Additions to widows' annuities
An addition of 540 francs is allowed to the widows of insured persons
born in the years 1861-1866 inclusive, by or on behalf of whom the
following contributions have been paid:
1.
2.
For persons born in the years 1861-1865 inclusive, any payment;
For persons born in 1866, a payment of 108 francs.
Widows of Belgian nationality of insured persons born in 1867-1907
inclusive receive an addition the amount of which is determined in
accordance with the date of birth of the insured person (see table VIII
BELGIUM
69
above), provided the contributions required for grant of the maximum
addition to an old-age annuity have been made. If not, the amount of
the addition is reduced by 60 francs a year for each missing or insufficient
annual contribution.
No addition is granted if the number of contributions paid is less
than half as great as the number which the insured person ought to have
paid, up to and including the year of insurance in which death occurred.
A widow who remarries loses her right to the addition from the month
following that of her remarriage.
ORPHANS' ALLOWANCES
Under the Act of 1930, the award of these allowances was subject to
the rules indicated below.
An annual allowance of 240 francs was granted to the widow (or
widower) for each dependent child under 16 years of age. On the death
of the widow or widower, this allowance—increased to 420 francs—was
paid to the person or organisation supporting the child.
On the death of a female insured person, unmarried, widowed or
divorced, leaving children under 16 years, an allowance of 240 francs
was paid to the person or organisation supporting such a child; this
allowance was not payable in addition to that mentioned in the preceding
paragraph.
As from 1 October 1937, under the Act of 15 December 1937, the provisions governing the grant of orphans' allowances have been as follows.
On the death of a male insured person (married), an annual allowance
of 240 francs is granted to the widow for each child under 16 years of age
who was dependent on the insured person at death. On the death of
the widow, this allowance—increased to 420 francs—is paid to the
person or organisation supporting the child.
On the death of an insured person of either sex, unmarried, widowed
or divorced, leaving children under 16 years of age who were dependent
on such person at death, an allowance of 420 francs per child is paid to
the person or organisation which supports the child; this allowance is
not payable in addition to that mentioned in the preceding paragraph.
In the case of insured persons born in the years 1861-1866 inclusive,
orphans' allowances are granted on the following conditions:
1. For insured persons born in 1861-1865 inclusive, provided some
payment has been made;
2. For insured persons born in 1866, provided a payment of 108 francs
(men) or 36 francs (women) has been made.
In the case of insured persons born in the years 1867-1907 inclusive,
no orphans' allowance can be granted if the number of contributions
paid amount to less than half the number which the insured person
ought to have paid, up to and including the year of insurance in which
death occurred.
Conditions of Nationality and Residence attached to Grant
of Additions and Allowances
The grant of additions and allowances has always been subject to
conditions of nationality.and residence. Under the Act of 15 December
1937, additions and allowances are granted in principle to insured
persons of Belgian nationality residing in Belgium.
70
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Where an insured person receives an old-age pension under the
legislation of a country which has concluded a reciprocity agreement
with Belgium, the amount contributed to the pension by the foreign
State is deducted from the addition normally allowable.
In determining whether an insured person has made at least half
the number of annual contributions required, i.e. whether he is entitled
to an addition, the payments made by him as an employed person
under the legislation of a country which has concluded a reciprocity
agreement with Belgium are taken into account. Where the addition
is granted in view of the contributions paid as an employed person
under the legislation of a country which has concluded such an agreement, the amount of the addition is reduced in accordance with the
ratio between the number of contributions actually paid in Belgium
and the number required of insured persons of the same age.
Foreign nationals may receive additions and allowances if a reciprocity
agreement has been concluded with their country of origin 1.
§ 5. — Cost of Administration
The cost of administration is borne:
(1) By the insurance institutions:
(2) By the Ministry of Labour and Social Welfare, for the organisation and supervision of compulsory insurance and for administering the additions to old-age annuities;
(3) By the Workers' Widows' and Orphans' Fund;
(4) By the Salaried Employees' Allowances Fund.
The tables on which are based the calculations of the annuities
constituted by the individual accumulation originally included a
uniform loading for administration expenses fixed at 3.5 per cent, of
the total contributions paid.
The tables brought into force for females and for workers under
18 years of age by the Royal Order of 28 April 1939 were drawn up with a
loading of 6 per cent, for workers' insurance and 4.5 per cent, for
salaried employees' insurance.
1
Two such agreements, with the Netherlands and France respectively, had
been concluded by the end of 1937.
CHAPTER III
FINANCIAL SYSTEM
As was indicated in the introduction, the financial organisation of
the workers' scheme and that of the salaried employees' scheme are
so similar that they can be considered together. Both schemes include
individual accumulation in personal accounts, and also a system whereby
the charges due to the " transitional " period are covered by one or
more central funds.
§ 1. — Individual Accumulation
Individual accumulation is operated according to the methods
employed in life assurance by private companies. The scales were
originally calculated on a uniform basis for both sexes and for all
categories in accordance with a single mortality table (Belgian F 1904).
The Royal Order of 28 April 1939 introduced for females and workers
under 18 years of age new scales based upon a more recent mortality
table (Belgian F 1930).
Briefly the actuarial operations are characterised by two essential
features:
(i) The contributions credited to the individual account of an
insured person are considered as premiums paid for a capital
sum assured on his life.
(ii) The capital sum assured is in every case converted into an
annuity.
In all these calculations the rate of interest is fixed at 3.75 per
cent.
The contributions credited to the personal accounts are intended for
the purchase of retiring annuities and annuities for widows. For this
purpose they are disposed of in the manner indicated below, according
to the category "of the insured person. The principal scales to be used
for assessing in the various cases the amount of that portion of the
pension which is constituted by individual accumulation are also
reproduced.
MALE INSURED PERSONS: WORKERS AGED 18 AND OVER
AND SALARIED EMPLOYEES
The following is a description of the actuarial method employed in
calculating the annuities.
72
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
The contributions credited to each personal account are applied to
assure:
(i) A capital sum payable on survival to age 65;
(ii) A capital sum payable on death before reaching age 65 (death
benefit).
These capital sums are compulsorily converted into annuities payable
either to the insured person (in which case they revert, to the extent
of one-half, to the widow on his death) or to the widow. The capital
sums assured are such that,, if the wife is the same age as the husband,
the portion of the widow's annuity constituted by individual accumulation
is equal to a percentage 1 (depending on the age of the husband at death) of
the retiring annuity earned by the husband at the moment of death.
The following formulae express, as á single premium, the present
value of the benefits due to the contributions credited to the personal
account of an insured person aged x (in this category) on the basis of
a unit retiring annuity commencing at age 65:
For the retiring annuity itself:
D,
aw
For the reversionary annuity:
D„
1
D„ ' 2 *
66/66
'
For the death benefit:
*-*x
x
where hx represents the percentage 2, according to the age at "death,
for calculating the widow's pension, on the basis of equal ages of husband
and wife.
Or for all benefits :
pu
1
64
,
ri 2X 0.01 hx Cx af+i + D65\ < +
'65/65
The retiring annuity commencing at age 65 which is purchased by
a single premium of one franc is thus (taking into account a loading
of 3.5 per cent, for administration expenses) 3 :
0.965
pu
1
2
3
These percentages are reproduced above: Chapter II, 3, pp. 59-60.
See above: Chapter II, 3, p. 70.
The numerical values are reproduced below in the second column of
table IX (p. 75).
BELGIUM
73
Finally, the retiring annuity, commencing at age 65, purchased by
constant premiums of one franc a year payable in twelfths at the end
of each month (premiums ceasing on attainment of age 65 or prior death),
is obtained, with the aid of the numerical factors described above, by
applying the formula
0.965
r =
•,
am).
pU
165-1 X
The tabular results of this calculation are shown in the.third column
of table IX.
A number of provisions have now to be considered which are closely
connected with the method of calculating the annuities and which
govern the manner of disposing of the death benefit where a single,
widowed or divorced insured person dies or enters upon his old-age
pension. As these provisions are not identical for workers and salaried
employees, they must be considered separately.
(a) Workers
In the event of the insured dying before entering on his old-age
pension, half of the death benefit—that is, the part corresponding to
his own contributions—is payable to those entitled (children under 16
or parents), the other half being paid to the Widows' and Orphans' Fund.
If there are no persons entitled, the whole of the death benefit is paid
to the Widows' and Orphans' Fund.
When a single, widowed or divorced insured person enters on his
old-age pension, the sum accumulated to provide the death benefit is
paid to the Widows' and Orphans' Fund. Consequently, this Fund
assumes the following obligations:
(i)
In the event of the insured marrying and subsequently dying,
the Widows' and Orphans' Fund pays to the widow an annuity
calculated on the basis of a capital sum equal to half the capital
sum corresponding to the old-age pension which the husband
was drawing;
(ii) In the event of the insured dying without leaving a widow, the
Widows' and Orphans' Fund pays to those entitled—if there
are any—half the capital sum, without interest, which was
transferred to it.
(b) Salaried Employees
In the event of the insured dying before entering on his old-age pension,
three-sevenths of the death benefit—that is, the part corresponding to
his own contributions—is payable to those entitled (children, parents
or persons nominated by the insured), the remainder being paid to the
Salaried Employees' Allowances Fund. If there are no persons entitled
the whole benefit is paid to the Salaried Employees' Allowances
Fund.
When a single, widowed or divorced insured person enters on his
old-age pension, the sum accumulated to provide the death benefit
is paid to the Salaried Employees' Allowances Fund; but a part of this
sum, up to three-sevenths of it, may, at the request of the insured,
be converted into a life annuity for his benefit.
Consequently the Salaried Employees' Allowances Fund assumes the
following obligations:
74
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
If the conversion option has not been used:
(i)
In the event of the insured marrying and then dying, the Allowances Fund pays to the widow an annuity calculated on the basis
of a capital sum equal to half the capital sum corresponding to
the old-age pension which the husband was drawing;
(ii) In the event of the insured dying without leaving a widow the
Allowances Fund pays to those entitled—if there are any—
three-sevenths of the capital sum, without interest, which was
transferred to it.
If the conversion option has been used, the Allowances Fund undertakes, in the event of his marrying and then dying, to pay to the widow
an annuity calculated on the basis of a capital sum equal to half of foursevenths of the capital sum corresponding to the old-age pension which
the husband was drawing.
MALE INSURED WORKERS UNDER 18 AND INSURED FEMALES
The contributions credited to each personal account are applied
entirely to the purchase of a retiring annuity.
In workers' insurance the pension annuity is calculated on the basis
of the formula:
0.94
66-* |
X
which represents the annuity deferred to age 65 purchased by a single
premium of one franc. The numerical values of this deferred annuity,
calculated on the basis previously indicated, are given below in the
fourth column of table IX.
The scale used under the salaried employees' scheme for the calculation
of annuities of insured females is obtained by a similar formula:
0.955
The numerical values corresponding to this formula can be calculated
from the figures in the fourth column of table IX by means of a constant
factor: 0.6258.
INSURED FEMALES WHO INSURE A LIFE ANNUITY
FOR DEPENDANTS
An insured female may have part of her contributions applied to the
purchase of a life annuity for the benefit of persons whom she supports
and who are designated by her. In these cases the actuarial method
employed in the calculation of the annuities differs from that indicated
ahove for insured females generally, and is as follows:
The contributions credited to each personal account are applied to
assure:
(i) A capital sum payable on survival to age 65 (this capital sum is
compulsorily converted into an annuity);
TABLE I X . — TABLE FOR USE IN CALCULATING A N N U I T I E S CONSTITUTED
BY I N D I V I D U A L ACCUMULATION
Age at payment
of contribution
(1)
14 years
15 "
16 "
17 "
18 "
19 »
20 "
21 "
22 »
23 »
24 "
25 »
26 "
27 "
28 »
29 »
30 "
31 »
32 "
33 »
34 »
35 "
36 "
37 »
38 "
39 »
40 "
41 »
42 "
43 »
44 "
45 »
46 »
47 »
48 »
49 »
50 »
51 »
52 »
53 »
54 »
55 »
56 "
57 »
58 »
59 »
60 »
61 »
62 »
63 »
64 "
65 »
Annuity commencing at age 6 E purchased
Male insured workers
aged 18 and over
Male insured
By fixed
workers under
premiums of
By a single
1 franc a year
premium
payable in twelfths by a payment
of 1 franc
at the end of each
of 1 franc
month until
age 65 or
previous death
(2)
(3)
(4)
0.989
—
—
0.951
—
—
0.914
—
—
0.879
—
—
0.452
8.926
0.845
0.440
8.619
0.811
8.327
0.779
0.429
0.419
8.063
0.748
7.802
0.718
0.409
0.400
7.539
0.690
0.390
7.279
0.662
0.380
7.022
0.636
0.370
6.766
0.611
0.360
6.513
0.586
0.351
6.262
0.563
0.341
6.015
0.540
0.332
5.771
0.519
0.322
5.530
0.498
0.313
5.293
0.478
0.304
5.059
0.459
0.295
4.830
0.440
0.286
4.604
0.423
0.278
4.383
0.405
0.269
4.166
0.389
3.953
0.261
0.373
0.253
3.746
0.358
0.245
3.543
0.343
0.237
3.343
0.329
0.229
3.151
0.315
0.221
2.964
0.302
0.214
2.782
0.290
0.207
Z.ÜU;
0.277
0.200
2.435
0.266
0.193
2.269
0.254
0.187
2.108
0.243
0.181
1.952
0.233
0.174
1.800
0.223
0.168
1.653
0.213
0.162
1.510
0.203
0.157
1.371
0.194
0.151
1.237
0.185
0.145
1.106
0.176
0.140
0.980
0.168
0.135
0.857
0.159
0.129
0.737
0.151
0.124
0.621
0.144
0.119
0.508
0.136
0.113
0.399
0.129
0.108
0.294 •
0.121
0.103
0.192
0.114
0.098
0.094
0.108
0.093
0.101
—
76
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
(ii) A capital sum payable on death.before entering on old-age pen- ¡
sion equal to 30 per cent, of the capital value, at the age of
death, of the annuity formed in the insured person's personal
account; this capital sum is converted into a life annuity for the
benefit of persons designated in advance by the insured.
The following formulae express, for workers' insurance, as a single
premium, the present value of the benefits due to the contributions
credited to the personal account of an insured person aged x (who has
requested the formation of a life annuity for the benefit of persons whom
she supports)—on the basis of a unit retiring annuity commencing at
age 65:
'
For the retiring annuity itself:
Bx * • '
For the death benefit:
D,
•^
0.30 CL
a"
x+i
Or in total:
0.30 C fl(4> + D„, «'
(4)
* X
D,
X
X+i
'
63
The retiring annuity commencing at age 65 which is purchased by a
single premium of one franc is thus (taking into account a loading of
6 per cent, for administration expenses):
0.94
•IJC
Finally, the retiring annuity, commencing at age 65, purchased by
constant premiums of one franc a year payable in twelfths at the end
of each month (premiums ceasing on attainment of age 65 or previous
death) is obtained, with the aid of the numerical factors described above,
by applying the formula:
0.94
,(12)
| 65-1
In the salaried employees' scheme analogous formulae are used which
may be deduced from the above by altering the age of commencement
of old-age pension from 65 to 60 and the loading for administrative
expenses from 6 to 4.5 per cent.
BELGIUM
77
GENERAL INDICATIONS ON ACCUMULATION OPERATIONS
On the same bases as the above tables, scales have been constructed
giving the coefficients to apply, for each category of insured person, in
order to reduce the amount of the old-age pension where this is drawn
before the normal age of 65 or 60 as the case may be.
In the workers' insurance scheme all the operations of individual
accumulation are carried out by the Pension Fund, which forms part of
the General Savings and Pension Fund. The Pension Fund still contains
the personal accounts of all salaried employees who joined before the
coming into force of the Act of 18 June 1930. Under this Act salaried
employees could insure either with the Pension Fund or with the National
Pension Fund for Salaried Employees or with other institutions. The
latter may be either autonomous, or employers' funds, or legally
constituted insurance companies. The conditions which they must
fulfil in order to obtain approval have been fixed by Royal Orders1.
Membership of an institution has for consequence the opening of a
personal account and therefore the accumulation of the contributions
paid to that account.
§ 2. — Central Funds
Under the 1930 Acts the additions to widows' annuities and the
orphans' allowances 2 were charged to the Widows' and Orphans' Fund,
in the case of both the workers' and the salaried employees' schemes.
This Fund had to receive on the one hand an annual grant from the
State, and on the other hand:
(1) Capital sums accruing on the death of single, widowed and
divorced insured persons;
(2) Employers' contributions in respect of wage earners over 65
years ;
(3) A contribution from male insured persons fixed at the rates
which have been indicated above 3 ;
(4) Interest earned by the investment of sums produced by the sale
of insurance stamps.
These last four items of receipts should allow the Widows' and Orphans' Fund to pay supplementary additions and supplementary allowances—subject to parliamentary approval.
A Royal Order of 30 March 1936 withdrew all State aid from the
Widows' and Orphans' Fund as far as the workers' scheme is concerned.
On the other hand, as concerned that scheme, the Fund had to bear only
the cost of supplementary additions and supplementary allowances.
In addition, the Widows' and Orphans' Fund is granted the status of a
legal person and can therefore receive gifts and bequests 4, subject to
previous authorisation by the Ministry of Labour and Social Welfare.
1
2
3
4
Dated 10 June 1930 and 26 November 1931.
Other than those payable from the Salaried Employees' Allowances Fund.
See Chapter II, 1, pp. 56-57.
The Act of 15 December 1937 assigns as further resources to the Widows'
and Orphans' Fund insurance reserves which have ceased to have any purpose.
78
ACTUARIAL T E C H N I Q U E
AND F I N A N C I A L
ORGANISATION
The cost of the additions to old-age and widows' annuities and of the
orphans' allowances, in the workers' scheme, is borne by án autonomous
fund which has been granted the status of a legal person. This " Appropriation Fund " is guaranteed by the State and is under the control of
the Audit Office. It is attached to the Ministry of Labour and
Social Welfare and is administered by a management committee composed of officials nominated respectively by the Minister of Labour and
Social Welfare and the Minister of Finance.
The preceding chapter showed how the benefits of the workers'
scheme will be provided, in the normal period, as to two-thirds by the
accumulation of the joint contributions, and as to one-third by State
subsidies chargeable at the date of payment of benefit, the total amount
of which is included in the budget each year. The additions to oldage and widows' annuities and the orphans' allowances were instituted
for the transitional period to take the place of the contributions which
would have been paid if the law had come into force at an earlier date.
The charge falling on the State on this account can therefore be included,
as to one-third, in the annual budget in the same way as the State
subsidies proportionate to annuities constituted by individual accumulation. The other two-thirds are treated as a State liability, amounting
at 1 January 1936 to approximately 7 thousand million francs. The
State discharges responsibility for the payment of interest on, and the
liquidation of, this debt by paying a fixed annuity to the Appropriation
Fund.
Consequently the resources of the Appropriation .Fund are provided
in the following manner:
1. An annual appropriation borne by the State is made equal to
one-third of the additions to old-age and widows' annuities and
of the orphans' allowances paid in the course of the year. The
amount of this grant is not finally determined until the year
following that during which the payments have been made.
In the budget for the current financial year an approximate
amount is credited, and after the auditing of the accounts and
the drawing-up of the annual balance sheet there is made either
a refund to the Treasury or a supplementary credit to the
Appropriation Fund.
2. A constant annuity payment is made, the amount of which is
calculated so as to liquidate in 99 years a capital sum equal
to the present value (at a rate of interest fixed by Royal Order)
of two-thirds of the probable expenditure of the Appropriation
Fund. Whenever the Minister of Labour and Social Welfare
thinks fit, and at least once in five years, a new estimate is made
of the probable expenditure of the Appropriation Fund; the
subsequent annuity payments are determined by the actual
expenditure in past financial years since 1 January 1936, and by
the new estimate.
3. Supplementary annuity payments may be made permitting the
reduction of the annuities still outstanding, either by the repayment of loans before their time or by setting up reserves.
For a period the resources of the Appropriation Fund will fall short
of its expenses and the difference will be met by borrowings from the
General Savings and Pension Fund. This institution will be obliged
to grant loans, by way of investment, for a term of years ending in
every case on 31 December 2034. The rate of interest on these loans
BELGIUM
79
will be deduced from the rate of interest in force for the calculation
of insurance annuities (at the present time 3.75 per cent.) by adding
a loading which will be fixed by Royal Order. After a certain number
of years part of the resources of the Appropriation Fund will be used
to provide the interest and capital repayment of these loans. When
all the additions and allowances have been paid, the remaining annuity
payments to be received by the Appropriation Fund up to the end of
the ninety-ninth year will be set oft—on the assumption that all the
adjustments provided have been effected—against those in respect of
which the Fund itself is indebted to the General Savings and Pension
Fund. It will then need only a simple transfer of credit in order to
liquidate the Appropriation Fund at the end of the transitional period.
The Salaried Employees' Allowances Fund bears the cost of old-age,
widows' and orphans' allowances granted under the conditions indicated
above x.
This Fund is supported by:
(1) A contribution payable by all employers and all salaried
employees who were born before 1 January 1895 2 ;
(2) The capital sums which revert to it in the event of the death
of single, widowed or divorced insured persons 3.
1
2
3
See Chapter II, 3, pp. 61-62.
See Chapter II, 1, pp. 57-58.
See Chapter III, 1, pp. 73-74.
CHAPTER IV
FINANCIAL ADMINISTRATION
§ 1. — Investment of Funds
STATUTORY PROVISIONS. VARIOUS CATEGORIES OF
INVESTMENT AUTHORISED
Each insurance institution administers the funds which correspond
to its accumulation operations, the total of which is at least equal to
the total of the mathematical reserves corresponding to its insured
members.
The authorised categories of investment for the National Pension
Fund for Salaried Employees and for approved insurance institutions
uicluue :
(1) Belgian or Colonial Public Funds and other securities guaranteed
by the State;
(2) Loans to provinces and communes;
(3) Mortgage-bonds on lands or mortgage loans;
(4) Debentures of Belgian companies which for at least five years
have met their liabilities from their ordinary resources;
(5) Loans for land purchase, for the construction or purchase of
property situated in Belgium, and for the setting-up or equipment
of health establishments for the use of salaried employees.
The investments which the Pension Fund is authorised to make by
the law governing i t x are approximately the same as those enumerated
above.
STATISTICS OF THE FUNDS INVESTED IN THE VARIOUS CATEGORIES
BY THE GENERAL SAVINGS AND PENSION FUND
The moneys of the Pension Fund and the other institutions which
combine to make up the General Savings and Pensions Fund are
administered jointly.
The Pension Fund draws up separately at the end of each year a
statement of its investments and their distribution among the various
authorised categories. The reserves of the Pension Fund result from
the accumulation operations carried out for a population of insured
persons including all the workers, the salaried employees who are
members of the Pension Fund, and other classes of insured persons
1
Law of 16 March 1865.
81
BELGIUM
(miners, and voluntarily insured persons). T h e following table gives
the statement of t h e investments of t h e Pension F u n d at t h e end of
1931 and of each subsequent year.
TABLE
X. —
STATEMENT OF T H E INVESTMENTS OF THE P E N S I O N FUND
(in thousands of francs)
At 31 Dec- At 31 Dec- At 31 Dec- At 31 Dec- At 31 Dec- At 31 Dec- At 31 December
ember
ember
ember
ember
ember
ember
1937
1931
1932
1933
1934
1935
1936
Direct Belgian Rentes . .
Indirect Belgian Rentes and
securities guaranteed by
the State
Communal, provincial and
municipal bonds . . . .
Debentures of Belgian companies
Mortgage loans
Workers' dwellings: advances to authorised societies
Advances to public moneylending offices
Totals
340,657
388,082
385,244
676,973 1,043,158 1,244,996
1,649,487
524,435
665,575
254,323
306,750
753,233
793,403
892,291 1,016,307
1,271,214
397,955
395,854
393,670
452,840
275,665
109,543
426,484
135,374
530,115
138,303
474,534
583,504
142,210
567,735
129,340
570,178
122,799
671,313
123,116
743,895
887,994
39,500
38,800
997,687 1.005.162
948,554
907,924
571,472
32,500
32,550
32,650
2,288,018 2,849,059 3,240,387 3,634,606 4,006,998 4,347,594
¿,793,786
37,850
37,500
§ 2. — Financial Results
The General Savings and Pension F u n d publishes each year a report
in which are shown t h e situation a n d t h e operations of t h e Pension
Fund [4].
BIBLIOGRAPHY
Legislation
Act of 14 July 1930, relating to the insurance of workers.
INTERNA-
TIONAL LABOUR OFFICE: Legislative Series, 1930, Bel. 7.
Act of 18 June 1930, relating to the insurance of salaried employees.
INTERNATIONAL LABOUR OFFICE: Legislative Series, 1930, Bel. 6.
Act of 15 December 1937, relating to insurance against old age and
premature death.
INTERNATIONAL LABOUR OFFICE: Legislative Series,
1937, Bel. 7.
Publications of the Insurance
4.
5.
Institutions
Comptes rendus (annuels) des opérations et de la situation de la Caisse
générale d'épargne et de retraite.
Tables belges 1934. Mortality tables constructed by the Actuarial
Department of the General Savings and Pension Fund.
6
82
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
6.
MINISTÈRE DE L'INTÉRIEUR ET DE LA SANTÉ PUBLIQUE, Office central
7.
de Statistique: Tables de mortalité de la population belge 1928-1932.
La Caisse générale d'épargne et de retraite et ses différents services. Brussels,
1930.
8.
CAISSE GÉNÉRALE D'ÉPARGNE ET DE RETRAITE, SERVICE DE LA CAISSE
DE RETRAITE: Rentes viagères, pensions des salariés, travailleurs indépendants et assurés libres. Brussels, 1934.
9.
CAISSE GÉNÉRALE D'ÉPARGNE ET DE RETRAITE, SERVICE DE LA CAISSE
DE RETRAITE: Pensions des employés. Brussels, 1932.
10.
CAISSE NATIONALE DES PENSIONS POUR EMPLOYÉS:
Renseignements
généraux. Tarifs et applications.
Books and Surveys
11.
12.
13.
H. VELGE: Les lois belges d'assurance et de prévoyance sociales. L'Edition
universelle, 53, rue Royale, Brussels, 1933.
E. MELOT: Les pensions de vieillesse. Editions de la Société d'études
morales, sociales et juridiques, 9, rue de Namur, Louvain, 1934.
DEROOVER and THÉ ATE: New Social Insurance Laws in Belgium. Transactions of the Eighth International Congress of Actuaries, London,
1927. Vol. I l l , pp. 92-107.
GZEGHO-SLO VARIA
Invalidity, Old-Age and Widows' and O r p h a n s '
Insurance for Workers
CONTENTS
Page
86
INTRODUCTION
CHAPTER I: Demographic Estimates, Bases and Experience
1.
2.
87
Biometrie Tables
Mortality and Invalidity Tables for Insured Persons . . .
Tables on Marital Status and Family Statistics
Insured Population .
Preparatory Estimates
Experience
3.
Number of Beneficiaries
106
. . . .
Table of Symbols introduced in Chapter I
CHAPTER I I : Financial Estimates, Bases and Experience
1.
87
87
94
104
104
Contributions '
Wage Classes and Rates of Contribution
Calculation of the Present Value of the Contributions which
the Scheme should receive under the Terms of the Legislation
Total Present Value of All Contributions and Estimate of
Their Annual Amount
Experience
110
113
115
115
115
116
118
119
2.
State Grants
125
3.
Benefits
Conditions of Award and Computation of Benefits . . . .
Essential Factors in the Calculation of the Present Value
of Benefits
Total Present Value of Benefits and Total Annual Emerging
Cost
Experience
127
127
Other Expenditure . . . •
Medical Assistance
Administration Expenses
145
145
146
4.
Table of Symbols introduced in Chapter II
133
143
144
147
84
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
Page
CHAPTER III : Financial System
149
1.
Calculation of the General Average Premiums
149
2.
Preliminary Valuation and Table of Annual Estimates . . .
152
3.
Actuarial Balance-Sheets and Financial Development of the
Central Institution
154
CHAPTER IV: Financial Administration
158
1.
Investment of Funds. Statutory Provisions and Regulations
Prescribed Classes of Securities
Authorised Classes of Securities
Other Statutory Provisions
Selection of Investments
The Investment of Funds in Practice
158
158
159
159
160
161
2.
Statistics of Investments
Composition of the Funds
Income from Investments
Rate of Interest Yielded
161
161
161
163
3.
'
Accounting and Statistics. Actuarial, and Financial Control .
Statutory Provisions
Statistical Returns
Publication of Statistics
BIBLIOGRAPHY . . . . . '
163
163
163
165
165
INDEX OF TABLES
I.
II.
HI.
IV.
Probabilities of Becoming Invalid
Validity Table
Probabilities of being Married
Distribution of Wives of Insured Men according to
Category
V. Average Age of Wife
VI. Exit from Insurance and Marital Status of Women . .
VII. Widows' Dependent Children
VIII. Initial Insured Population
IX. Male Insured Population. Female Insured Population
X. Insured Population as at 1 January 1930
XI. Numbers of Beneficiaries (Estimates)
XII. Invalidity Pensions. Old-Age Pensions
XIII. Widows' and Widowers' Pensions. Orphans' Pensions
XIV. Dowry and Lump-Sum Payment on Death
XV. Average Daily Wage (Males and Females)
XVI. Average Weekly Contribution (Males and Females) . .
XVII. Annual Numbers of Full Contributors
XVIII. Average Annual Number of Contribution Days
89
92
94
Age
. .
. .
. .
. .
97
99
101
104
105
107
109
110
Ill
112
113
120
122
123
124
CZECHOSLOVAKIA
85
Page
XIX.
XX.
XXI.
XXII.
XXIII.
XXIV.
XXV.
XXVI.
XXVII.
XXVIII.
XXIX.
Annual Amounts of State Individual Subsidies (Estimates) . 126
State Individual Subsidies
127
Invalidity Pension: Amount and Percentage of Average
Wage
133
Supplementary Benefits in Respect of Insured Persons
born before 1 January 1899
133
Annual Emerging Cost of Benefits (Estimates)
143
Amount of Benefits Paid each Year. Average Amount of
Pension Paid each Year
144
Preliminary Valuation Sheet
153
Table of Annual Estimates: Probable Progress of Income
and Outgo — Growth of Funds
154
Actuarial Balance-Sheet of the Central Institution as at
1 January 1930
156
Financial Progress of the Central Institution from 1926 to
1937
157
List of Investments of the Central Institution as at 31 December in each Year
162
INTRODUCTION
The compulsory .insurance of workers against invalidity, old age and
death was initiated in the Republic of Gzecho-SIovakia by the Act of
9 October 1924; it came into force on 1 July 1926. The original
legislation was amended as from 1 January 1929, by the Act of 8 November
1928 [5], which extended the scope of the benefits and increased their
amount. The Government Order of 15 June 1934 l had as its principal
object the improvement of the financial condition of institutions
effecting sickness insurance, which had suffered from the decrease in
membership and the fall in wages caused by the economic crisis. It
reduced various sickness benefits, but on the other hand made certain
improvements in the benefits of the insurance scheme against invalidity,
old age and death. The improvements, which operated as from 1 July
1934, included the following principal amendments: (1) the lowering
of the pension age for widows from 65 to 60; (2) the addition of supplementary benefits to insured persons born before 1 January 1899;
(3) the extension of the period during which the right to all benefits
is maintained.
The compulsory insurance of workers against invalidity, old age and
death, to which this anatysis is devoted and the scope of which will
be defined later, is administered by the Central Social Insurance
Institution, which is established at Prague. It delegates to sickness
insurance institutions—which are under its control—certain administrative functions, such as the fixing and receipt of contributions,
the admission, cancellation and changes in class of insured persons, the
receipt of applications for benefit, and the acceptance of such applications after investigation, with supporting- documents. The Central
Institution also acts as co-ordinating medium between the various
sickness insurance organisations, whose administrative technique it
strives to unify and improve.
It was impossible to include within the scope of this volume the
studies of a purely technical nature which accompanied the preparation
of the Czecho-Slovak legislation. The documents' which seemed to
show most clearly the technique underlying the system of insurance
which is the subject of this monograph—and to which reference is
constantly made—are, on the one hand, the reports leading up to the
1924 Act, more particularly the explanatory memorandum of 1924[2],
and, on the other hand, the parliamentary document [6] which reproduces the conclusions arrived at in the investigations. leading up to
the 1934 Act and in which are included the actuarial balance-sheet of
1 January 1930 and the data on which it is based.
Finally, this, like the remaining sections of the volume, is confined
to compulsory insurance, leaving aside voluntary insurance as far as
was possible to do so 2 .
1
To which legal force was given by another legislative document (Act
No.2 146 of 1934): Bibliography No. 1.
. Although they do not come within the scope of this volume, marriage
allowances could not be disregarded, because they form an integral part of the
financial organisation of the system, because they, together with the other
benefits, are covered by a single inclusive contribution, and finally because
they figure in the actuarial balance sheet.
CHAPTER I
DEMOGRAPHIC ESTIMATES, BASES AND EXPERIENCE
§ 1. — Biometrie Tables
This section is divided into two parts devoted respectively to:
(a) The tables of mortality and invalidity which constitute the
essential technical bases of insurance against invalidity and
old age.
(b) The tables of dependency statistics to which recourse must be
made in the insurance of benefits on behalf of members of the
insured person's family.
MORTALITY AND INVALIDITY TABLES FOR INSURED PERSONS
The demographic bases underlying the system of insurance against
invalidity and old age may be considered as centred around two
" validity tables " (Aktivitätsordnung) which give for males and females
respectively the subdivision into healthy and invalid lives of the
survivors of an initial group of healthy persons of the same age. These
validity tables are not produced directly from the statistical material
obtained from actual observations; they are deduced, by methods
which will be described later, from the following data:
General life probabilities (healthy and invalid lives together);
Rates of cessation of invalidity (according to age and duration of
invalidity) ;
Probabilities of becoming invalid.
General Life Tables
In the investigations leading up to the 1924 Act use was made of
the life table for males and females constructed for the general Austrian
population by means of:
The general Census of 31 December 1910;
The records of deaths during the 1years 1906 to 1910, and
Graduation by the Bruns method .
These two life tables, which are denoted by Zx, are reproduced below
in columns 4 and 7 of table II.
For the actuarial valuations as at 1 January 1935 the Austrian
table appeared to be too high and for it was substituted the mortality
table which had just been constructed for Czecho-Slovakia on the
basis of the deaths registered in the years 1929 to 1932 and of the
general Census of the population on 1 December 1930.
1
Oesterreichische Statistik, Neue Folge, I. Band, 4. Heft, Karl Gerold's Sohn,
Vienna, 1917.
88
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
Rates of Cessation of Invalidity
Use has been made of " select " rates of cessation of invalidity <JKi+ft
dependent on both age and duration of invalidity, for durations not
greater than 10 years, and " ultimate " rates ax for durations of invalidity greater than 10 years.
a.£]+fe represents the probability that an insured person who became
an invalid at age \ and who was still an invalid at age 5 + k will cease
to be so before attaining age £ + k + 1 ;
ax represents the probability that an insured person aged x, who
has been an invalid for at least 10 years, will cease to be so before
attaining age x + 1.
The rates of cessation a ra+fe and ax were first borrowed from the
German table 1 constructed from the experience of the workers' insurance
scheme between 1891 and 1899, which was published in 1906 and which
has become a classic table in the technique of invalidity insurance.
Starting with an initial group of 100,000 invalids aged 20, the
function ¿L +ft for the surviving invalidity pensions is produced step
by step by applying the following formulae:
1. Becoming invalid at 20:
f
— f
"[20J+1
¿[20] + 2
=
\J-
¿[20]+ 1 ( I
¿[20] + l l
2.
(\ _
"[20]
- ^
U
P0]/
^pOJ+l)
¿[20J+10 ( 1
¿3!
Duration of invalidity greater than 10 years:
¿32 = hi (1
=
ha
3.
OpOj + lo)
¿32 [*•
^l)
a
3i)
Age at becoming invalid greater than 20 and duration of invalidity
equal to or less than 10 years:
ll
1
—f
¿E]+10 — ' ç + n
.
i
•
¿ra+fe = ¿ra+fe+i • -,1
1
— %]+fe
where
o < A < io .
1
" Das Ausscheiden der Invalidenrentenempfänger der Jahre 1891 bis 1899
aus dem Rentengenuss " {Amtliche Nachrichten des Reichsversicherungsamts,
1. Beiheft, Berlin 1906). This table is described and reproduced in that part
of this volume which deals with the insurance against invalidity, old age
and death of workers in Germany, pp. 331-332 and 334.
89
CZECHOSLOVAKIA
For the actuarial balance-sheet as at 1 January 1935 there were
substituted for the German table 1891-1899 used hitherto the more
recent rates (1924-1927) also based on the experience of the German
workers' insurance against invalidity, old age and death \
Probabilities of becoming Invalid
The rates ix which represent for an insured person aged x the probability of becoming invalid within a year, were first deduced, for each
sex, from data derived from the German workers' scheme of insurance
against invalidity, old age and death in the years 1906 to 1908 2. The
results agreed substantially with those which had been calculated by
Lindstedt from the same statistical material for the Swedish social
insurance scheme 3.
At the higher ages, that is from age 68 for men and 70 for women,
there were substituted for the calculated figures the rates constructed
by Zimmermann 4 for the manual workers on the non-train staff of
the German railways.
The rates fixed for the probability of becoming invalid are shown
in the following table:
TABLE I .
PROBABILITIES OF BECOMING INVALID
Age
Males
Females
20
21
22
23
24
25
0.0006
0.0008
0.0010
0.0012
0.0014
0.0016
0.0007
0.0010
0.0013
0.0018
0.0023
0.0028
26
27
28
29
30
0.0018
0.0020
0.0021
0.0023
0.0025
0.0032
0.0036
0.0041
0.0045
0.0048
32
33
34
35
0.0026
0.0027
0.0028
0.0029
0.0030
0.0051
0.0053
0.0055
0.0056
0.0058
36
37
38
39
40
0.0031
0.0033
0.0035
0.0037
0.0040
0.0059
0.0062
0.0065
0.0070
0.0075
1
See that section of this volume devoted to the insurance against invalidity,
old age and death of workers in Germany, pp. 331-332 and 334.
2
These statistics were published in Amtliche Nachrichten des Reichsversicherungsamts, 1908, 1909, 1910.
3
ALDERDOMSFÖRSÄKRINGSKOMITTEN:
Kostnadsberäkningar
II.
Stockholm,
1912.
* Beiträge zur Theorie der Dienstunfähigkeits- und Sterbens-Statistik, 2. Heft,
Berlin, 1887.
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"tOfcObO IO "to
CO tO tO I-* H*
^ O l tO v j t o
CO iO CO CO O
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0.2173
0.2223
1 1 11 1 1
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91
CZECHO-SLOVAKIA
When the actuarial balance-sheet as at 1 January 1935 was being
drawn up it was found that the rates of invalidity which had been in
use up to then were too low: consequently it was decided to substitute
new figures based on the experience during the years 1925-1930 of the
insurance of workers in Germany against invalidity, old age and death 1.
Construction of Validity Tables
For each sex a group of 100,000 healthy persons is observed from
age 20, and the numbers laa and ln of survivors who are healthy and
invalid respectively are calculated for all ages x.
From the rates of cessation of invalidity o n + f e it is possible to obtain
the probability fi% ? that an insured person who became invalid at
age Z, will be living and still an invalid at age x, thus:
PU = (* - °J (* - w ) • • • ( ! - ' r a + ^ J •
Using continuous expressions and instantaneous rates of becoming
invalid i (x), the number of invalids at age x produced by the initial
group at age 20 is expressed by the formula
t; = fr^i^f
di
The numbers lx are calculated from the life table lx, from the rates of
becoming invalid ix and from the rates of cessation of invalidity <*R]+ft
by means of approximate methods which are equivalent to the solution
of Volterra's integral equation of the second degree:
laa[v\ — nv\
-
j
rr(Ç)*(5)^(*,ç)rfç.
For ages less than 20 the validity table is extended by means of
the formula
¿x+i
=
''x
V1
aa
9x
*x)
in which the rates of mortality q of healthy persons are merged with
the rates qx applicable to the general mortality.
The two validity tables which were constructed, by the method
which we have just given in principle, in the course of the studies
preparatory to the 1924 Act are reproduced below:
1
See the section of this volume devoted to the insurance of workers in
Germany against invalidity, old age and death, p. 401.
92
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
TABLE I I .
V A L I D I T Y TABLE
Females
Males
Age
(1)
Healthy
lives
Invalids
Total
(4) = (2)
Healthy
lives
(2)
(3)
+ (3)
(5)
Invalid
(6)
Total
(7) = (5)
+ (6)
20
21
22
23
24
25
.
.
.
.
.
.
..
..
..
..
..
..
100,000
99,299
98,576
97,853
97,130
96,410
36
69
103
141
183
100,000
99,335
98,645
97,956
97,271
96,593
100,000
99,289
98,547
97,778
96,966
96,119
26
27
28
29
30
.
.
.
.
.
..
..
..
..
..
95,693
94,977
94,258
93,538
92,814
229
279
334
390
449
95,922
95,256
94,592
93,928
93,263
95,238
94,337
93,416
92,462
91,489
1,054
1,275
95,752
95,008
94,264
93,516
92,764
31
32
33
34
35
.
.
.
.
.
..
..
..
..
..
92,080
91,334
90,570
89,784
88,971
515
582
650
719
791
92,595
91,916
91,220
90,503
89,762
90,496
89,486
88,466
87,434
86,392
1,511
. 1,759
2,009
2,266
2,525
92,007
91,245
90,475
89,700
88,917
36
37
38
39
40
.
.
.
.
.
..
..
. .
. .
..
o o .1 o n
864
940
85,337
84,268
83,174
82,060
80,910
2,790
3,058
3,342
3,639
3,963
88,127
87,326
86,516
85,699
84,873
41
42
43
44
45
.
.
.
.
.
46
47
48
49
50
45
99
164
256
373
514
671
848
100,000
99,334
98,646
97,942
97,222
96,492
87,250
86,335
85,373
84,368
1,022
1,112
1,207
88,991
88,190
87,357
86,485
85,575
..
..
..
..
..
83,319
82,234
81,111
79,945
78,726
1,318
1,441
1,578
1,728
1,898
84,637
83,675
82,689
81,673
80,624
79,727
78,519
77,281
76,013
74,713
4,309
4,675
5,060
5,465
5,892
84,036
83,194
82,341
81,478
80,605
.
.
.
.
.
..
..
..
..
..
77,545
76,116
74,692
73,184
71,583
2,082
2,284
2,524
2,797
3,110
79,536
78,400
77,216
75,981
74,693
73,383
72,007
70,575
69,077
67,483
6,338
6,814
7,326
7,880
8,498
79,721
78,821
77,901
76,957
75,981
51
52
53
54
55
.
.
.
.
.
..
..
..
..
..
69,891
68,098
' 66,195
64,180
62,030
3.457
3,848
4,288
4,778
5,341
73,348
71,946
70,483
68,958
67,371
65,770
63,941
61,964
59,844
57,545
9,196
9,961
10,819
11,750
12,785
74,966
73,902
72,783
71,594
70,330
56
57
58
59
60
.
.
.
.
.
..
..
..
..
..
59,749
57,302
54,688
51,906
48,962
5,968
6,691
7,515
8,433
9,440
65,717
63,993
62,203
60,339
58,402
55,042
52,331
49,367
46,139
42,599
13,935
15,199
16,613
18,183
19,953
68,977
67,530
65,980
64,322
62,552
61
62
63
64
65
.
.
.
.
.
..
..
..
..
. . .
45,829
42,487
38,978
35,341
31,633
10,562
11,820
13,170
14,576
15,985
56,391
54,307
52,148
49,917
47,618
38,823
34,926
31,019
27,222
23,584
21,846
23,750
25,554
27,145
28,479
60,669
58,676
56,573
54,367
52,063
UOjlii /
93
CZECHOSLOVAKIA
TABLE II.
VALIDITY TABLE
(continued)
Females
Males
Age
(1)
Healthy
lives
(2)
Invalids
(3)
Total
(4) - (2)
+ (3)
Healtny
lives
(5)
Invalids
(6)
Total
(7) = (5)
+ (6)
66
67
68
69
70
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
27,942
24,356
20,917
17,682
14,709
17,309
18,470
19,429
20,141
20,559
45,251
42,826
40,346
37,823
35,268
20,160
16,977
14,069
11,419
9,021
29,512
30,221
30,585
30,628
30,369
49,672
47,198
44,654
42,047
39,390
71
72
73
74
75
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
11,997
9,631
7,602
5.928
4,570
20,695
20,478
19,935
19,064
17,922
32.692
30,109
27,537
24,992
22,492
6,921
5,127
3,640
2,455
1,530
29,774
28,843
27,587
26.028
24,224
36,695
33,970
31,227
28,483
25,754
76
77
78
79
80
.
.
.
.
.
.
.
.
.
.
.
.
.
3,481
2,614
1,929
1,394
973
16,576
15,092
13,532
11,948
10,389
20,057
17,706
15,461
13,342
11,362
820
282
22,238
20,137
17,982
23,058
20,419
17,858
81
82
83
84
85
86
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
645
399
215
88
10
8,893
7,485
6,188
5,017
3,984
3,094
:—
—
—
—
—
—
—
~
—
—
—
—
—
—
—
~
~
9,538
7,884
6,403
5,105^
3,994
3,069
—
—
—
—
—
—
—
M. Tauberes adjusting Coefficients
The probabilities of cessation of invalidity a refer to exits from
invalidity which are due not only to death but also ,to other causes.
In a certain number of cases it is necessary to have probabilities which
refer only to exits due to death. For this purpose use is made of
M. Tauber's coefficient TX, which shows, according to the German
experience and for quinquennial ages of entry on invalidity, the proportion of cessations of invalidity which is due to death.
Age at entry
on invalidity
20
25
30
35
40
45
Coefficient
0.800
0.825
0.850
0.875
0.900
0.925
Age at entry
on invalidity
50
55
60
65
70
. . . . . .
Coefficient
0.950
0.975
1.000
1.000
1.000
94
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
TABLES ON MARITAL STATUS AND FAMILY STATISTICS
Probability of being Married, Males
The probability Çm that a male insured person aged x is married is
derived from the Census taken in Gzecho-Slovakia on 15 February
1921 [1]. These results, for quinquennial age groups, have been adopted
after comparison with figures which had been obtained in respect of
Austrian workers during the year 1896. By graphic interpolation the
following probabilities of being married applicable to each age have
been obtained:
TABLE I I I . —
Age
Age
Males
15 . . .
0.0004
16 . . .
17 . . .
18 . . .
20
. ..
0.0007
.0.0011
0.0019
0.0036
0.0108
21
22
23
24
25
. ..
...
...
. ..
. ..
0.0373
0.0842
0.1456
0.2108
0.2761
26
27
28
29
30
. ..
....
. ..
. ..
. ..
0.3414
0.4066
0.4718
0.5225
0.5802
31
32
33
34
35
.
.
.
.
.
36
37
38
39
40
...
. ..
. ..
...
. ..
4 f\
13
P R O B A B I L I T I E S OF B E I N G
. . .
..
..
..
..
..
0.6319
0.6791
0.7221
0.7556
' 0.7822
0.8018
0.8177
0.8297
0.8380
0.8443
MARRIED
Males
'Age
Males
41
42
43
44
45
.
.
.
.
.
..
..
..
..
..
.0.8498
0.8546
0.8565
0.8584
0.8592
66
67
68
69
70
. ..
. ..
...
. ..
. ..
0.7406
0.7275
0.7141
0.6990
0.6839
46
47
48
49
50
. ..
. ..
. ..
. ..
...
0.8598
0.8603
0.8606
0.8592
0.8576
71
72
73
74
75
.
.
.
.
.
.
.
.
.
.
0.6688
0.6537
0.6386
0.6224
0.6062
51
'52
53
54
55
. ..
...
. ..
. ..
. ..
0.8558
0.8527
0.8493
0.8448
0.8387
76
77
78
79
80
...
. ..
. ..
. ..
. ..
0.5899
0.5737
0.5575
0.5457
0.5338
56
57
58
59
60
;
.
.
.
.
..
..
..
..
..
0.8321
0.8246
0.8166
0.8095
.0.8014
81
82
83
84
85
.
.
.
.
.
..
..
..
..
..
0.5220
0.5101
0.4983
0.4796
0.4610
61
62
63
64
65
...
. ..
. ..
. ..
. ..
0.7933
0.7847
0.7756
0.7644
0.7525
86
87
88
89
90
.
.
.
.
.
.
;
.
.
.
0.4423
0.4237
0.4050
0.3988
0.3855
.
.
.
.
.
.
.
.
.
.
These probabilities of being married enable the number 0\tx of
married insured men to be calculated at each age from the total
number of insured men JRX, thus:
0f]ll = JR* • C
95
CZECHO-SLOVA.KIA
Probabilities of being Married, Females
The probability XJ that a woman aged y is married has also been
derived from the results of the Census taken in Gzecho-Slovakia on
15 February 1921; it has only been used in calculations referring to
marriage allowances.
Marriage Rates, Females
The probability ¡x that a woman aged y will marry during the year
has been constructed by graphic interpolation from quinquennial
figures obtained from Austrian statistics l relating approximately to
the territory of the Gzecho-Slovak Republic.
Distribution of Wives of Insured Men according to Age and Category
Calculation was first made of the numbers V of women aged y,
who are wives of insured men, by the following procedure.
In the course of the work on the 1921 Census an investigation into
746,551 marriages was made at Prague and its suburbs. These marriages
were classified according to age of husband x and age of wife y, in
both cases in quinquennial age groups. The resulting double-entry
table has been used in the following manner. If we denote by ffljy
the number in this table which corresponds to the group whose mean
ages are a:' and y' and if we assume that
nú, = 2 ^ >
then the number of wives of insured men
y=y'+2
V
V =
¿i
^v
y=y'-2
is calculated, in each quinquennial age group, from the number of
insured married men by means of the formula:
x v
i _ 'S mc
V„
i/,l
y'
^ j
x'
''
'3c' > j ^
J2J
m
x'y'
V'
From the resulting values V , the numbers V corresponding to each
individual age y is obtained by means of graphic interpolation.
1
Oesterreichische Statistik, Neue Folge, 14. Band, 1. Heft (p. 22 Übersicht 8;
column headed " Sudetenländer "), Karl Gerold's Sohn, Vienna, 1918.
96
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
The total number of women aged y who are wives of insured men
was then divided into categories in accordance with the following
table and formulae:
Healthy persons, themselves insured:
Tpa
Healthy persons:
<aa
V,"
v„
tV_
I
Healthy persons, not
themselves insured:
,npa
V y — V^y
y
y
Total number of wives of
insured men V„
Invalids in receipt of pension:
Invalid persons:
v!,
v..
y
v
y
y
' ,aa
Invalids not in receipt of
pension :
7Î<λ
The numbers V^a of healthy wives of insured men who are themselves
insured have been deduced from those given by the 1921 Census for
married women who were employed (on 15 February 1921) in iüsured
occupations. The Census figures related to quinquennial age groups,
and values for individual ages were obtained therefrom by means of
graphic interpolation.
The final figures obtained for the subdivision of wives of insured
men according to age and category are given in the following table.
97
CZECHOSLOVAKIA
TABLE IV.
DISTRIBUTION OF WIVES OF INSURED MEN ACCORDING
TO AGE AND CATEGORY
Wives of insured men
Healthy
Invalid
Age
Total
y
Not
themselves
insured
ynpa
V
60
154
295
447
627
10
226
495
913
1,643
Themselves
insured
vpa
V
15 .
16.
17 .
18 .
19.
. . .
. . .
. . .
. . .
. . .
20
21
22
23
24
.
.
.
.
.
.
.
.
.
.
.
.
.
...
.
.
.
.
.
906
1,416
2,269
3,705
4,353
2,794
4,981
8,520
17,659
19,684
25
26
27
28
29
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4,774
4,962
5,001
4,990
4,953
30.
31 .
32 .
33 .
34'.
. .
.
. .
. .
. .
.
35
36
37
38
39
.
.
.
!
.
40
41
42
43
44
.
.
.
.
.
Pensioned
Not
pensioned
vi(p)
y
yi<np>
V
—
—
—
—
__
—
—
—
—
—
v
„
V
70
38Ò
790 '
1,360
2,270
1
2
6
11
2
9
30
52
3,700
6,400
10,800
21,400'
24,100
20,528
20,898
21,093
21,172
21,130
19
27
' 36
45
56
79
113
150
193
241
25,400
26,000
26,280
26,400
26,380
4,908
4,858
4,805
4,751
4,696
21,050
20,922
20,753
20,554
20,296
68
81
94
• 108
122
294
349
408
467
526
26,320
26,210
26,060
25,880
25,640
. . .
.
. . .
'. '. \
. . .
4.640
4,582
4,518
4,371
20,000
19,568
19,085
18^527
17,930
136
150
164
179
194
584
640
693
744
795
25,360
24,940
24.460
23,900
23,290
. . .
. . ;.
. . .
. . .
.
4,289
4,201
4,114
4,026
3,938
17,313
16,633
16,074
15,580
15,140
210
227
250
264
283
848
899
952
1,020
1,089
22,660
21,960
21,390
20,890
20,450
.
.
.
4¡450
45.
46 .
47 .
48 .
49 .
.
.
.
.
. .
.
.
.
.
'.
.
.
.
.
3,851
3,763
3,675
3,587
3,500
l'4,743
14,389
13,947
13,427
12,890
304
. 326
348
372
399
1,162
1,242
1,320
1,394
1,471
20,060
19,720
19,290
18,780
18,260
50
51
52
53
54
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3,390
3,230
2,969
2,662
2,437
11,860
10,772
9,940
9,359
8,847
427
452
463
469
478
1,493
1,506
1,548
1,630
1,738
17,170
15,960
14,920
14,120
13,500
.
.
.
.
.
7
98
ACTUARIAL TECHNIQUE AND FINANCIAL
TABLE
IV.
ORGANISATION
DISTRIBUTION OF WIVES OF INSURED MEN
TO AGE AND CATEGORY
(continued)
ACCORDING
Wives of insured men
0
Invalid
Healthy
Age
Total
Themselves
insured
v
V
pa
V
Not
themselves
insured
Pensioned
"pa
vt(p)
v
y
V
Not
pensioned
v
t uip)
V
V
V
55
56
57
58
59
.
.
.
.
.
.
. .
. .
. .
. .
.
.
.
.
2,251
2,105
1,969
1,837
1,708
8,320
7,726
7,082
6,393
5,680
500
533
572
619
673
1,849
1,956
2,057
2,152
2,239
12,920
12,320
11,680
11,000
10,300
60
61
62
63
64
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1,584
1,460
1,336
1,212
1,088
4,913
4,066
3,277
2,582
2,021
742
822
908
998
1,085
2,301
2,289
2,229
2,128
2,016
9,540
8,640
7,750
6,920
6,210
.
.
.
.
.
e
ecf\
.
.
.
f\C r
a u i
X ETC C
1,OUO
A M r r
1,1^1
A
onn
J.,OZ /
O,OVJ\*
66
67
68
69
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
840
716
610
517
1,157
831
553
330
1,230
1,275
1,326
1,387
1,693
1,478
1,201
886
4,920
4,300
3,690
3,120
70
71
72
73
74
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
430
360
260
167
100
175
44.
587
187
—•
—
—
1,448
1,549
1,460
1,263
1,060
•—
—
—
2,640
2,140
1,720
1,430
1,160
75
76
77
78
79
.
.
.
.
.
. . .
. . .
. . .
. . .
. . .
53
23
7
—
—
—
—.
—
—
847
637
473
370
280
—
—
—
—
900
660
480
370
280
80
81
82
83
84
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
—
—
—
—
—
—
—
210
160
120
80
60
.—.
—
—
—
210
160
120
80
60
85
86
87
88
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
—
—
—
—
—
40
30
20
10
—
—
—
40
30
20
10
CC
yj*j
.
99
CZECHOSLOVAKIA
Probability that at the Moment of Death of an Insured Man his Widow
(aged j), who is not Herself Insured, will never enter into Insurance
These probabilities wnp have been borrowed from data used in
Germany for the technical calculations relating to the insurance of
workers against invalidity, old age and death 1.
Probability that the Widow of an Insured Man will not Herself
be Insured at Age y
For these probabilities ü n p there have been adopted the figures
representing, according to the general census of the Czecho-SIovak
population on 15 February 1921, the ratio of widows who are not
employed to the total number of widows.
Average Age of Wife
The average age of the wife for each age of busband has been calculated
with the help of the table mentioned above 2 which gives the distribution of marriages according to the ages of husband and wife (for
quinquennial age groups).
By using the formulae
y
=
JL
2i ™x>v
y
and by interpolation, the age yx corresponding to each age x has been
obtained:
TABLE V.
Age of husband
15
16
17
18
19
20
21
22
23
24
AVERAGE AGE OF WIFE
Age of wife
. . . . .
.
. . . . .
.
Age of husband
21
21
21
22
22
25
26
27
28
29
23
23
24
24
24
30
31
32
33
34
Age of wife
25
25
26
26
27
0
. . . . . . .
28
28
29
30
31
1
See the section of this volume devoted to this insurance scheme, pp. 331332
and 334.
2
See p. 320.
lOO
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
TABLE V. — AVERAGE AGE OF W I F E
Age of husband
Age of wife
(continued)
Age of husband
Age of wife
35
36
37
38
39
32
33
34
35
36
65
66
67
68
69
40
41
42
43
44
37
37
38
40
70
71
72
73
74
63
64
65
65
66
45
46
47
48
49
41
42
43
43
44
75
76
77
78
79
67
67
68
69
69
50
51
52
53
ÇA
45
46
47
48
80
81
82
83
70
70
71
72
55
56
57
58
59
50
51
52
53
54
85
86
87
88
89
73
73
74
74
75
60
61
62
63
64
55
56
57
58
59
90
75
.
38
60
60
61
62
63
...>...
rtn
Cessation of Insurance and Marital Status of Insured Women
Data collected by the Central Irstitution during the years 1926-30
provided material for constructing the table reproduced" below which
gives, for an initial group of 103,045 insured women at age 15, the
number (P^Ja) who remain in insurance, subdivided into married,
widowed or divorced (¿° a ) and spinsters
(l^^).
The calculations have been based on the following formulae [6]:
aaivp)
Pjaa
+K
;aa<s)
H
jaawp)
in which
? aa(s)
,oa
/.
..
= V i Py-i I 1
.
fVi) '-
jciawp)
j.aa
V-i
¿V-i + V i
jaais)
r.
, aa
P-y-i V i Py-i '
f
p™ represents the probability - ^ that a healthy woman aged y
h
will still be healthy at age y + 1, assumed to be the same for
insured spinsters as for insured married women;
101
CZECHOSLOVAKIA
6y represents the probability that an insured woman who marries at
age y will not cease to be insured, for which is adopted (in
accordance with the experience of the first half of 1929) the
proportion 0.50 up to age 30 and 0.75 for ages above 30;
\j.y represents the probability—already mentioned—that a woman
aged y will marry in the course of a year.
TABLE VI.
E X I T FROM INSURANCE AND MARITAL STATUS
OF WOMEN BY AGE
Insured women
Age
Married
Single
Total
,aa(vp)
iaa{s)
Pjaa
y
15
16
17
18
19
51
431
1,756
103,045
102,509
101,833
100,463
97,175
103,045
102,509
101,884
100,894
98,931
20
21
22
23
24
4,248
7,747
11,943
16,528
20,910
91,505
83,795
74,661
64,723
55,149
95,753
91,542
86,604
81,251
76,059
25
26
27
28
29
24,764
28,059
30,793
32,983
34,493
46,593
39,121
32,752
27,451
23,478
71,357
67,180
63,545
60,434
57,971
30
31
32
33
34
35,453
36,076
36,884
37.435
37,770
20,585
18,346
16,527
15.043
13,839
56,038
54,422
53,411
52.478
51,609
35
36
37
38
39
37,942
37,994
37,952
37,829
37,633
12,844
12,000
11,271
10,632
10,075
50,786
49,994
49,223
48,461
47,708
40
41
42
43
44
37,372
37,054
36,690
36,282
35,835
9,578
9,133
8,732
8,367
8,032
46,950
46,187
45,422
44,649
43,867
45
46
47
48
49
35,351
34,833
34,277
33,680
33,038
7,723
7,437
7,168
6,913
6,669
43,074
42,270
41,445
40,593
39,707
102
ACTUARIAL T E C H N I Q U E
TABLE V I . —
AND FINANCIAL
E X I T FROM I N S U R A N C E
ORGANISATION
AND MARITAL STATUS OF
WOMEN BY AGE (continued)
Insured women
Age
Married
Single .
Total
jaa(vp)
V
7oa(s)
V
Pjaa
y
50
51
52
53
54
32,338
31,570
30,752
29,850
28,869
6.432
6,198
5,966
5,732
5,496
38,770
37,768
36,718
35,582
34,365
55
56
57
58
59
27,792
26,608
25,317
23,897
22,345
5,253
4,999
4,734
4,452
4,150
33,045
31,607
30,051
28,349
26,495
60
61
62
63
64
20,638
18,814
16,925
15.032
13,192
3,824
3,480
3,131
2.781
2,441
24,462
22,294
20,056
17.813
15,633
65
66
67
68
69
11,429
9,770
8,227
6,818
5,534
2,115
1,808
1,523
1,262
1,024
13,544
11,578
9,750
8,080
6,558
70
71
72
73
74'
4,372
3,354
2,485
1,764
1,190
809
621
460
327
221
5,181
3,975
2,945
2,091
1,411
742
398
137
138
74
25
880
472
162
V
75
76
77
This table has been used for females, in place of the validity table
adopted in 1924, in all the calculations for the actuarial balance-sheet
as at 1 January 1930.
Demographic Bases for Children
The life table I applicable to children up to age 17 is obtained by
taking at each age the arithmetic mean of the male and female life
tables derived from the data collected for the general Austrian population between 1906 and 1910.
In order to obtain the number kz of children according to age of
father x and age of child z, recourse was had to a double-entry table
103
CZECHOSLOVAKIA
which had been constructed for the staff of the Prussian railways \
The figures in this table cease at age 14 and they were accordingly
extended to age 17 by straight-line extrapolation.
The probability K^ that an insured aged x is the father of a child
aged less than 15 has been borrowed from data relating to the staff
of a section of the Prussian railways 2 (Berg-Markische Eisenbahn).
On the basis of these probabilities could be calculated, at each age,
the number L of insured men corresponding on the average to the kx
children in the double-entry table mentioned above: it was simply a
matter of dividing the number of fathers entered on each line of this
table by the corresponding probability Kx. In this way was obtained
the demographic basis necessary for the calculations referring to the
children of insured men, that is, the average numbers kx of children
living at each age z corresponding to a series L^ of insured men.
The data collected by the Central Social Insurance Institution showed
that the numbers kx derived from the 1921 Census were too large and
that they should be reduced by 10 per cent.
The data resulting from the operation of the scheme which have
been collected by the Central Institution gave information as to the
number of children dependent upon widows. For a total of 12,301 widows
having 3,527 dependent children there were calculated, for quinquennial
age groups, the proportions 8 of widows who had two or more dependent
children 3.
Age of widow
18-22
23-27
28-32
33-37
38-42
43-47
48-52
ft)
ET
58-62
63 a n d over
Ratio of number
of widows who have
' 2 or more dependent
children to the total
number of widows
. . . . . .
0.099
0.320
0.519
0.542
0.502
0.346
0.178
0.057
0.006
0.001
In addition the double-entry table reproduced below has been constructed, showing the numbers k y of children aged z who are dependent
upon a widow belonging to a given quinquennial age group.
1
See the section of this volume devoted to the insurance of workers in
Germany
against invalidity, old age and death, p. 314.
2
See the section of this volume devoted to the insurance of workers in
Germany
against invalidity, old age and death, p. 315.
3
See Bibliography No. 6, p. 41. The interpolated figures for individual
ages appear on p. 57 of the same document.
104
ACTUARIAL T E C H N I Q U E
TABLE V I I .
AND FINANCIAL
ORGANISATION
WIDOWS' DEPENDENT
CHILDREN
N u m b e r of children at age
Age
of
widow
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
20-59 . .
1
2
3
4
5
8
20
5
5
4
1
1
25
50
40
16
9
1
20
69
51
54
21
2
14
76
82
59
34
7
5
3
3
72 57 43 30
68 111 84 101
70 73 96 94
39 50 60 53
12 26 35 38
1
1
6
3
1
1
— — —
6
7
8
9
10
1
17 10
92 52
90 78
69 63
56 61
6 26
3
3
li
12
13
14
15
2
18
41
33
41
21
3
—
1
8
38
38
36
34
7
— — —
4 4 —
1
—
24
54
58
43
18
—
16
17
1
9
40
26
45
25
6
32
41
39
31
19
21
18
29
22
9
3
7
8
6
4
1-17
81
447
753
864
623
480
201
56
44 141 217 272 267 321 325 323 334 293 198 159 151 162 166 104 28 3,505
§ 2. — Insured Population
Membership of the scheme of workers' insurance against invalidity,
old age and death is compulsory on every person who has attained
the age of 16 who, in the Republic of Czecho-Slovakia, performs work
or renders services under a contract of work, service or apprenticeship
(as an improver or probationer) and not by way of subsidiary or casual
employment. It includes, then, agricultural workers, and domestic
servants as well as home workers. On the other hand it exempts:
(1) salaried employees and miners; (2) employees of the State or of
public corporate bodies (and workers assimilated to these employees)
who are covered by special insurance schemes whose benefits are at
least equivalent to those of the workers' scheme of insurance against
invalidity, old age and death; (3) persons who, after attaining the age
of 60, enter for the first time an employment entailing liability to
insurance.
PREPARATORY ESTIMATES
In the estimates which were made in the course of preparatory
investigations certain fundamental elements are introduced, on the one
hand the initial insured population and its age distribution and on the
other hand the numbers who would enter into insurance in the course
of each of the years subsequent to the scheme's coming into force.
Initial Insured Population
In order to estimate the initial insured population and its age
distribution reference was again made to the results of the Census of
15 February 1921. From the figures which in these results represented
the total population deductions were made, for the various quinquennial
age groups, in respect of the numbers of persons who were not subject
to the workers' scheme of insurance against invalidity, old age and
death because they were covered for the same risks by another scheme.
Forthispurpose use was made of complementary occupational statistics
and of the data supplied by the insurance schemes in force hitherto.
From the figures thus obtained for the various quinquennial
105
CZECHOSLOVAKIA
age groups, results for each individual age between 20 and 60 were
deduced by graphic interpolation. For ages between 15 and 20 on
the one hand and between 60 and 65 on the other hand it was considered
preferable to calculate directly from the original statistical material.
The numbers referring to men were adjusted between ages 20 and 25
so as to take into account the modifications made to the employed
population by military service.
Finally, the initial insured populations of both sexes and for each
age between 15 and 60 have been represented by the numbers 0TLx
and &>y reproduced below:
TABLE V I I I . —
Age
INITIAL I N S U R E D
POPULATION
Males
Females
....
....
....
....
....
27,348
26,773
26,230
25,757
25,398
10,072
9,865
9,668
9,496
9,342
46
47
48
49
50
...
...
...
...
...
.
.
.
.
.
25,096
24,747
24,358
23,943
23,505
9,187
9,016
8,828
8,634
8,379
28,488
24,892
21,724
19,361
17,645
51
52
53
54
55
....
....
....
....
....
23,032
22,504
21,906
21,200
20,392
8,121
7,838
7,530
7,192
6,847
37,412
34,814
33,078
31,917
31,013
16,357
15,263
14,316
13,455
12,734
56
57
58
59
60
....
....
....
....
....
19,341
17,979
16,765
15,774
6,500
6,204
5,966
5,779
A K CiCC.
K till
30,311
29,717
29,126
28,534
27,945
12,108
11,551
11,047
10,643
10,324
Age
Males
Females
15
55,728
30,974
16
17
18 . . . . .
19
20
71,507
83,661
85,326
85,114
84,071
43,798
50,451
54,600
53,034
49,646
41
42
43
44
45
21
22
23
24
25
81,653
77,706
70,168
60,186
51,504
46,094
42,716
39,423
35,997
32,288
26
27
28
29
30
47,795
46,465
45,023
43,252
40,828
31
32
33
34
35
36
37
38
39
40 . . . . .
Total . . 1,790,968 1,111.857
Annual Numbers of Entrants
It was observed first of all that:
(1) Workers usually enter into employment before the age of 20
and consequently entry into insurance will take place almost
always before that age;
(2) Insured persons who enter after age 20 will for the most part
have already been employed in an insured occupation; in most
cases these insured persons will bring with them a capital sum
and their movement should be considered, from the point of
106
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
view of the financial stability of the scheme, not as an entry
but as a transfer.
(3) Insured persons who enter after age 20 without bringing a
capital sum as transfer value will be very few in number and
the losses due to such entrants will be more than compensated
by the reduction in liabilities consequent upon persons leaving
the scheme.
As a result of these considerations it was assumed that entry into
insurance would always take place between the ages of 15 and 19.
The number of insured persons entering at each of these five ages has
been deduced from the figures relating to the initial population in the
case of men by the formula
,aa
l'x-í
and by an analogous formula in the case of women.
The annual coefficients of increase cx were first calculated by means of
the 1900 and 1910 Censuses. However, for the calculation of the
annual number of entrants 2 t m and 2 1 , as a safety measure and on
the assumption that the population would not continue to increase at
a rate as rapid as that during the decennium 1900-1910, all the coefficients cx were reduced to unity.
The followingMale»
are the results obtained in this manner:
Females
21™ = 55,728
2 l ( 6 = 30,1
21™ = 16,013
21' 16 = 12,!
21™ = 12,483
Srt„ = 6,1
21™ =
2,092
K= *.'
21™ =
274
EXPERIENCE
The insured population is the subject of two series of statistics, the
most important of which will now be indicated, with the significance
of each, but the summary analysis of the processes by which they
are constructed will be reserved for Chapter IV.
Each sickness insurance institution follows the movement of its
membership from day to day by means of the admissions and cancellations which it registers. From the daily figures thus obtained are
calculated monthly averages which are sent (on monthly returns) to
the Central Institution, which arranges for their publication [11, 12].
By means of counterfoils detached from folios which the sickness
insurance institutions send annually to the Central Institution an
enumeration of the insured membership took place on 30 June and
31 December of each year up to 1932 and on 30 June 1933 and 1934.
The results are tabulated separately for the different types of sickness
insurance institution in quinquennial age groups and for each sex [10,
12]. The following table reproduces the figures relating to the total
insured population:
0
107
CZECHO-SLOVAKIA
TABLE IX (à).
—
1927
Year
of birth
30.VI
1916
and
later
1911-1916
1906-1910
1901-1905
1896-1900
1891-1895
1886-1890
1881-1885
1876-1880
1871-1875
1866-1870
1865
and
earlier.
Not stated
MALE I N S U R E D POPULATION
31.XII
30.VI
1930
1929
1928
31.XII
30.VI
31.XII
30.VI
31.XII
121,420
329,113
263,468
194,178
132,726
105,314
91,364
81,502
71,163
49,616
146,063
241,118
212,918
163,619
109,128
86,750
74,746
66,117
57,768
40,101
196,503
323,650
275,933
197,790
133,485
105,912
92,620
82,160
71,370
48,410
201,510
223,467
217,862
160,177
107,462
85,328
73,260
.64,335
56,025
38,197
251,140
315,332
275,319
195,764
132,750
106,207
92,662
82,079
70,770
47,515
202,381
211,459
216,213
156,886
106,327
84,349
71,396
65,236
55,138
36,622
260,447
275,699
248,897
180,344
123,322
98,472
85,839
74,714
63,504
41,450
205,810
177,379
191,144
140,217
94,341
75,275
64,861
56,136
47,067
30,608
784
3,773
639
2,863
712
3,204
589
2,525
495
2,919
348
2,239
403
1,116
301
699
T o t a l . . 1,444,421 1,201,830 1,531,749 1,230,737 1,572,952 1,208,594 1,454,207 1,083,838
1932
1931
Year
of birth
30. V I
31.XII
.30.VI
31.XII
1933
1934
30.VI
30. V I
1916
later . .
1911-1916 .
1906-1910 .
1901-1905 .
1896-1900 .
1891-1895 .
1886-1890 .
1881-1885 .
1876-1880 .
1871-1875 .
1866-1870 .
1865 and
earlier. .
Not stated.
297
295,261
261,619
241,540
177,160
119,377
96,515
82,428
69,438
58,378
35,519
223
205,386
155,580
164,077
121,936
81,603
64,520
55,172
47,177
38,968
23,512
18,111
265,822
228,477
213,939
156,543
105,098
82,594
70,635
59,288
46,799
25,607
27,547
164,791
138,220
143,016
105,987
70,507
55,335
46,627
39,127
31,191
16,985
49,038
217,787
198,567
188,569
137,836
92,441
71,970
60,447
49,015
37,015
17,889
81,998
192,472
210,912
187,136
138,010
92,064
71,059
58,228
46,150
32,751
13,323
322
723
209
489
187
487
135
286
136
729
109
865
T o t a l . . 1,438,577
958,852
1,273,587
839,754
1,121,439 1,125,077
108
ACTUARIAL T E C H N I Q U E AND F I N A N C I A L ORGANISATION
TABLE IX (b).
—
F E M A L E I N S U R E D POPULATION
1928
1927
1929
1930
Y e a r of birth
31.XII
30. V I
1916 and
later . . .
1911-1916 .
1906-1910 .
1901-1905 .
1896-1900 .
1891-1895 .
1886-1890 .
1881-1885 .
1876-1880 .
1871-1875 .
1866-1870 .
1865 and
earlier . .
Not stated .
31.XII
30.VI
30.VI
31.XII
31.XII
30.VI
.
.
71,378 90,038 121,173 134,265 161,560 148,596 183,247 160,033
. 246,879 219,463 240,767 210,896 233,546 199,690 207,232 170,672
. 160,757 141,450 148,498 128,079 140,047 120,156 122,738 100,709
.
98,519 88,229 94,981 82,800 92,986 80,339 84,222 69,675
.
65,707 60,084 65,576 57,822 66,273 57,129 62,171 51,276
.
50,663 45,982 50,422 44,583 50,726 44,053 47,423 38,921
.
39,615 35,571 39,123 34,136 39,348 33,888 37,247 29,961
.
31,282 27,980 30,908 26,637 30,835 26,270 27,871 22,420
.
24,853 21,776 24,136 . 20,575 23,586 19,979 21,931 17,085
.
15,253 13,168 14,472 12,306 13,557 11,338 12,531
9,523
.
.
296
2,437
UU / jUU./
232
1,850
<-} f. K
OO O
242
2,009
o o o OAn
211
1,583
30.VI
1916
and
later . .
218
1911-1916 . 219,232
1906-1910 . 188,474
1901-1905 . 112,936
1896-1900 .
81,179
1891-1895 .
60,143
1886-1890 .
45,512
1881-1885 .
35,230
1876-1880 .
26,617
1871-1875 .
20,212
1866-1870 . 10,945
1865 and
earlier. .
209
Not stated.
309
Total. .
801,216
152
1,626
296
604
nnn
r * n
225
377
/»n/\
/ o ö , o vo
1931
Year
of birth
246
1,955
1932
1933
1934
31.XII
30.YI
31.XII
30.VI
30.YI
167
189,346
148,510
85,246
63,194
47,119
35,327
26,988
20,100
15,001
7,765
11,762
215,350
159,183
96,837
70,646
52,109
38,825
29,830
22,457
16,528
7,941
18,897
178,904
128,112
78,032
56,364
41,715
30,869
23,246
17,167
12,270
5,513
34,056
207,369
145,491
90,953
67,481
50,039
36,805
27,948
20,481
14,450
5,943
62,217
197,076
136,994
88,413
67,108
49,811
35,982
26,566
18,915
12,377
4,273
141
240
144
293
98
171
90
424
82
651
639,144
721,905
591,358
701,530
700,465
nnn
109
CZECHO-SLOVAKIA
For the actuarial balance-sheet as at 1 January 1930 the following
figures taken from the registration statistics [6] have been used to
ascertain, at the valuation date, the insured membership, and its
distribution by age:
TABLE X. — INSURED POPULATION AS AT 1 JANUARY 1 9 3 0
Age
Males
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
3738
39
40
41
42
43
44
18,820
81,797
94,407
93,984
92,837
90,143
82,250
84,290
81,718
74,127
73,443
70,995
69,548
64,117
61,076
55,305
48,054
45,891
41,359
38,957
35,479
34,399
30,896
31,743
28,282
28,282
27,562
26,995
26,224
ZO,;B;
Age
Females
14,035
62,039
73,030
71,384
68,793
63,67356,528
50,381
46,587
39,609
38,016
34,519
33,389
29,582
28,427
26,278
24,194
22,837
21,866
20,726
19,131
17,989
15,974
15,579
13,896
13,787
13,807
12,567
12,107
11,695
45
....
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
Total
Males
Females
25,455
24,403
24,296
22,411
21,834
22,573
22,094
20,689
20,524
20,127
20,195
19,747
17,274
17,383
16,384
14,860
13,390
11,299
5,377
11,065
10,257
10,101
9,031
8,504
8,677
8,257
7,667
7,461
7,283
6,903
6,789
5,951
5,470
5,119
4,481
3,986
3,269
1,771
273
152
104
87
93
91
255
105
51
33
45
14
2,019,891 1,104,970
In the same balance-sheet the annual numbers of entrants into
insurance were estimated [6] by means of the formulae—and consequently
on the same assumptions—previously adopted in the preparatory
investigations \ The entry ages are limited to 16 to 19 for males and
16 to 18 for females and the annual numbers are estimated as follows:
Females
. Males
1
dl™e = 71,507
9Vw = 43,798
SI™ = 12,483
9t[7 =
6,881
SI™ =
2,092
Si'
4,431
SI™ =
274
See above, p. 106.
=
110
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
T h e annual average of t h e whole insured membership was as follows:
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
•. .
• . .
2,142,926
2,330,932
2,287,896
2,172,857
2,062,475
1,881,244
1,710,383
1,680,787
1,692,104
1,850,797
2,041,454
§ 3. — Number of Beneficiaries
In the preparatory estimates may be found t h e table reproduced
below, which gives for a n u m b e r of years (from five to t w e n t y years
after the commencement of t h e scheme) t h e number of pensioners in
each of the principal categories 1.
TABLE X I . —
NUMBERS OF
BENEFICIARIES
(Estimates in the preparatory investigations)
Number of years
since coming
into operation
of the scheme
5
6
7
8
9
10
11
12
13
14 '
15
16
17
18
19
20
Number of beneficiaries
Invalidity
pension
Old-age
pension
9,069
26,193
41,750
56,362
70,259
83,545
96,281
108,514
120,284
131,124
141,993
153,010
163,302
173,327
183,133
192,783
3,187
10,122
18,028
26,616
35,631
44,789
• 53,786
62,407
70,475
77,879
84,608
90,656
96,029
100,739
104,813
108,277
Widows', 1
widowers'
and orphans'
pension
|
4,371
13,008
31,605
61,975
83,157
101,164
117,515
133,750
148,926
163,906
177,491
191,263
204,127
216,658
228,917
240,978
T Lmm
t ,
16,627
49,323
91,383
144,953
189,047
229,498 .
267,582
304,671
339,685
372,909
404,092
434,929
• 463,458
490,724
516,863
542,038
1
A subsequent estimate modified slightly the columns of this table referring
to beneficiaries in receipt of invalidity, widows', widowers' and orphans'
pensions. See Bibliography, No. 3, p. 165.
111
CZECHO-SLOVAKIA
The statistics of the Central Institution show, for each year and for
each class of pension:
(1) The number of claims paid and the number of claims rejected,
whence may be found the number of pensions awarded; and
(2) The number of new pensioners and of cancellations, whence
may be deduced the number of pensions in force at the end of
the year.
The results appear, for each class of pension, in tables XII and XIII
below, which begin with the year 1929 because, on account of the
waiting period, no pension could be awarded during the preceding
years.
TABLE XII (a).
INVALIDITY PENSIONS
Number of
Year
1929x
1930
1931
1932
1933
1934
1935
1936
1937
. . . .
claims
decided by
the Central
Institution
pensions
granted
coming into
payment
pensions
current at
the end of
the year
1,069
7,725
19,880
35,915
48,681
58,175
61,618
50,649
40,427
604
6.031
16,329
28,183
34,962
38,475
38,170
26,961
21,384
613
6,012
16,123
27,685
35,379
38,625
39,570
27,261
21,313
604
6,062
20,495
44,801
73,330
102,077
129,654
141,407
147,803
i On account of the qualifying period no invalidity pension could be paid before 1929.
TABLE XII (b).
OLD-AGE PENSIONS
Number of
Year
claims
decided by
the Central
Institution
pensions
granted
pensions
coming into
pensions
current at
the end of
the year
1929 *
. . . .
1930
1931
1932
1933
1934
. . . . .
1935
1936
1937
16
17
1,086
5,692
8,469
9,617
10,346
9,484
9,022
1
14
951
4,951
7,266
8,433
8,187
7,720
7,452
1
11
921
4,906
7,314
8,451
8,684
7,719
7,400
1
11
916
5,661
12,375
19,705
26,936
32,834
37,945
i On account of the qualifying period no old-age pension could be paid before 1929.
112
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE XIII (a).
WIDOWS' AND WIDOWERS' PENSIONS
Number of
Year
1929 *
. . . .
1930
1931
. . . . .
1932
1933
1934
1935
1936
1937
claims
decided by
the Central
Institution
pensions
granted
coming into
payment
pensions
current at
the end of
the year
1,395
3,609
4,710
5,291
5,895
6,502
7,529
8,259
8,949
1,007
2,565
3,572
4,063
4,510
4,951
5,668
5,881
6,459
1,043
2,568
3,577
4,007
4,572
5,128
6,067
5,842
6,318
1,007
3,399
6,680
10,263
14,171
18,274
23,191
27,226
31,262
"
i On account of the qualifying period no widow's or widower's pension could be paid
before 1929.
TABLE XIII (b). — ORPHANS' PENSIONS
Number of
Year
1929l
1930
1931
1932
1933
1934
1935
1936
1937
0
. . . .
claims
decided by
the Central
Institution
pensions
granted
coming into
payment
the end of
the year
pensions
1,610
4,053
4,990
5,160
5,580
5,623
6,296
6,847
6,896
1,444
3,618
4,463
4,676
5,056
5,144
5,673
6,153
6,173
1,503
3,666
4,498
4,679
. 5,262
5,309
6,292
6,409
6,471
1,444
4,752
8,712
12,736
17,327
21,845
27,282
31,906
35,753
i On account of the qualifying period no orphan's pension could be paid before 1929.
113 ,
CZECHO-SLOVAKIA
The number of cases entailing t h e p a y m e n t of a marriage allowance
or the payment of a capital sum on death are shown below:
TABLE XIV. —
D O W R Y AND LUMP-SUM P A Y M E N T ON
DEATH
Number of payments
Year
1926
1927
1928
1929l
1930
1931
1932
1933
1934
1935
1936
1937
Of a dowry
Of a lump-sum
payment on death
22,238
41,291
46,535
48,335
44,958
45,567
45,215
48,331
52,168
655
5,086
6,300
5,706
6,624
6,510
6,671
7,204
7,067
7,347
7,982
8,256
i The dowry was instituted by t h e 1928 Act.
TABLE OF SYMBOLS INTRODUCED IN CHAPTER I
= General life table.
"X
jCLCt -jli
L
x
^c
CT
KJ+ft
= Number of healthy and invalid persons in the validity table
(4 = C + Q.
= Probability of cessation of invalidity (Ç being the age at becoming
invalid and k the duration of invalidity).
= Invalid life table.
= Annual rate of becoming invalid.
K*,5
"X
c
= Probability that an insured person who became invalid at age .Ç
will still be an invalid and living at age x.
= M. Tauber's adjusting coefficients.
= Probability of being married, males.
= Probability of being married, females.
3RX
= Probability that a woman aged y will marry within the
year.
= Number of insured men in the initial population.
= Number of insured women in the initial population.
o 114
£fLm
x
£fV
v
5ît î "
tnx v
\
"Va
= Number of males who enter into insurance each year.
= Number of females who enter into insurance each year.
= Number of insured married men.
= Number of marriages at age x for husband and age y
for wife.
= Total number of wives of insured men.
= Number of healthy wives of insured men.
1
V
y
v
„rpa
Vy
~,npa
*y
•cri<p>
v
•yUnp)
v
np
w
v
np
a
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
y
= Number of invalid wives of insured men.
= Number of healthy wives of insured men, who are
themselves insured.
= Number of healthy wives of insured men, who are not
themselves insured.
= N u m b e r of invalid wives of insured m e n , in receipt of
pension.
— N u m b e r of invalid wives of insured m e n , n o t in receipt
of pension.
= Probability, at the moment of death of an insured man,
that his widow (aged y) who is not herself insured will
never enter into insurance.
= Probability that the widow of an insured man will not
herself be insured at age y.
yx
— A v e r a g e a g e of wife of insured m e n aged x.
jauvp) jcuxs) p,aa = N u m b e r of w o m e n r e m a i n i n g in insurance (out of an
"v
' y ' v
initial group of insured females at age 15) married,
spinsters and total respectively.
0
= Probability that an insured woman marrying at age y
v
will not exit from insurance.
/
= Life table of children up to age 17.
i/
K
x
j£
LW
v
= Number of children for age of father x and age of
child z.
= Probability that an insured man aged x will be the
father of a child under age 15.
= Numbers of insured men corresponding to numbers kx
of children.
= R a t i o of n u m b e r of widows h a v i n g t w o or m o r e dependent children to the total number of widows.
= Number of children aged z who are dependent upon a
widow aged y.
Cx~
= Annual coefficient of increase for age x.
*
L
*
S
v
CHAPTER II
FINANCIAL ESTIMATES, BASES AND EXPERIENCE
This chapter deals with the resources and the liabilities of the insurance
scheme. The resources are constituted by contributions from insured
persons and their employers, interest on accumulated funds and subsidies from the State. The liabilities comprise expenditure on benefits
and administration. Each of the categories of receipt and expenditure
which have just been enumerated will be examined in turn. Remarks
on the interest on accumulated funds, however, will be relegated toI
the following chapter, where the preparatory
estimates (table XXVI)
and the actual income (table XXVIII) 2 will be shown.
§ 1. — Contributions
Contributions are payable in equal parts by the insured person and
his employer. They are uniform for each of the wage classes into
which insured persons are divided.
WAGE CLASSES AND RATES OF CONTRIBUTION
In the technical investigations which led up to the 1924 Act, insured
persons were divided into four wage classes. The rates of contribution
were uniform for each class and were based on the " general average
premiums " brought out by the actuarial calculations which will be
considered in the following chapter 1 . Below are reproduced the
weekly contributions originally estimated and the contributions fixed
by the 1924 Act, which are about 1.8 per cent, smaller. This reduction
i2 Page 154.
Page 157.
3
Chapter III, § 1, pp. 150-151.
116
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
was introduced to counterbalance the interest profit due to the excess of
the rate of interest on the accumulated funds over the basic rate 1 .
Total weekly contribution
(in crowns)
Limits of daily wage
(in crowns)
Wage class
A
B
C
D
Rate
originally
considered
in the
preparatory
investigations
Reduced
rates fixed
by the
1924 Act
4.40
5.80
7.20
9.00
4.30
5.70
7.10
8.80
14 to 22
22 t o 28.50
More t h a n 28.50
The 1928 Act increased to five the number of wage classes and fixed
the rates of contribution as follows:
Wage class
Aa
Ab
B
G
D
Limits of daily wage (in crowns)
10 t o
14 t o
22 to
More
Total weekly
contribution
(in crowns)
14
22
28.50
t h a n 28.50
2.60
3.60
5.10
6.60
8.40
CALCULATION OF THE PRESENT VALUE OF THE CONTRIBUTIONS WHICH
THE SCHEME SHOULD RECEIVE UNDER THE TERMS OF THE LEGISLATION
Each of the basic elements which appear in this calculation will be
reviewed.
Distribution of Insured Persons by Wage Class
In the preparatory investigations use was made first of all of the
distribution by wage class which was indicated by the statistics regarding
wages as at i January 1923 [2]. Later, recourse was had to other
1
See later, pp. 153 and 163.
117
CZECHOSLOVAKIA
figures supplied by the wages statistics as at 1 January 1924 [3].
two series of figures are reproduced below:
The
Percentage of insured persons in each
class, from the statistics of wage earners
as at 1 January
Wage class
1924
1923
A
B .
C
D
41.10
19.36
11.34
28.10
•
52.75
21.65
10.87
14.73
100.—
100.—
Average Number of Contribution Weeks Per Annum
In the investigations preparatory to the 1924 Act it was assumed,
on the basis of statistics prepared in the scheme of insurance of workers
in Germany against invalidity, old age and death l , that the average
number of contribution weeks per annum would be
In class A, 42 weeks
„ ,. B, 44 „
» » C, 46 „
. „ „ D, 48 „
In the preparation of the 1930 balance-sheet recourse was had to
new figures calculated by the Central Institution by relating the contribution days in the year 1929—divided according to age and wage
class—to the population registered in the middle of the same year.
The double-entry table obtained in this manner is shown at the" end
of this section among the statistics of operation of the scheme.
Present Value of a Unit Contribution
The essential element in the calculation of the present value of
contributions is the present value a a a which is calculated from the
±
X
column I™ in the validity table by means of the commutations 2 :
D aa
v
1
=
jaa x
K V
N
2»
aa
x
See the section of this volume devoted to the insurance of workers in
Germany against invalidity, old age and death, pp. 327, 329 and 384.
2
v represents the discount factor -rrr-,' i the annual interest on a monetary
unit and w the limiting age.
118
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
A unit contribution payable by an insured person aged x as long as
he is healthy and not later than age 65 is a temporary annuity the
present value of which is calculated by the formula * :
-N:
N
aX, 65-3c|
Á clause in the Act provides that the payment of the old-age pension
may be postponed .when the insured person continues to earn a certain
minimum wage. Denoting by aft the proportion of the pensions commencing at each age, the present value a^g^^r must be replaced by
the following, in order to take into account the option to postpone:
afe N
N
(p) aa
fe = 65
D
In the investigations preparatory to the 1924 Act the coefficients <xft
were borrowed from data arising out of the insurance of workers in
Germany against invalidity, old age and death; for the investigations
preparatory to the 1928 Act the original coefficients were slightly
modified. These two series of figures are reproduced in the table below:
Age
65
66
67
68
69
70
71
72
Percentage 100 a^ of old-age pensions
commencing at each age
Adopted in
Adopted in
investigations
investigations
preparatory
preparatory
to 1928 Act
to 1924 Act
50
13
11
9
7
5
3
2
55
15
10
8
6
4
2
0
100
100
TOTAL PRESENT VALUE OF ALL CONTRIBUTIONS AND ESTIMATE
OF THEIR ANNUAL AMOUNT
The total present value of contributions receivable by the insurance
scheme under the legislation constitutes the principal part of its assets
1
An adjustment must be made to the commutation functions N to take
account of the weekly payment of contributions. To avoid repetition reference should be made to p. 134, where the method of calculation and the
values of the adjustment applicable to all cases of fractional payment are
indicated.
119
CZECHOSLOVAKIA
and appears under this heading in the preliminary 1924 balance-sheet 1
and in the 1930 actuarial balance-sheet 2 .
The estimates of the annual total amount of contributions produced
in the preparatory investigations appear in the table of estimates
reproduced in Chapter I I I 3 .
EXPERIENCE
The Centra] Institution collates the contributions paid each year
from the folios sent in annually by the sickness insurance institutions
and in this way obtains a very valuable and accurate account of the
contributing population and its characteristics.
The contribution days are the subject of several analyses [10]:
(1) By quinquennia! age groups, sex and wage class;
(2) By age groups, sex and province; and
(3) By type of sickness insurance institution, sex and wage class.
The distribution by wage class of 100 contribution days each year
is reproduced below:
Wage class
Year
Aa
24.00
22.53
23.49
26.09
29.45
30.72
31.40
c
D
24.17
23.49
13.39
13.94
17.44
21.25
22.64
22.87
23.68
23.86
23.57
23.60
23.51
14.46
14.76
14.07
12.90
11.62
11.36
10.95
24.54
25.09
23.09
20.13
17.25
16.41
15.89
Af>
45.00
41.32
1927
1928
1929
1930
1931
1932
1933
1934
1935
|
14.36
14.75
15.67
17.02
18.11
17.91
18.25
The average daily wage, on which is based the distribution of insured
persons by wage class, has been obtained at 30 June and 31 December
of each year up to 1932 and at 31 December 1933 and 1934 for the
different types of sickness insurance institutions, for quinquennial age
groups and for each sex. The averages for the total insured population
are grouped in the following table:
1
2
3
See later, Chapter III, p. 153.
See later, Chapter III, p. 156.
Table XXVI, p. 154.
120
ACTUARIAL T E C H N I Q U E AND F I N A N C I A L ORGANISATION
TABLE XV (a).
—
AVERAGE DAILY W A G E :
MALES
(In crowns)
1928
1927
Year of birth
1929
1930
30.VI
31.XII
30.VI
31.XII
30.VI
31.XII
30.VI
31. X I I
6.74
14.27
22.14
24.27
25.40
25.28
25.25
24.76
23.79
22.68
6.54
15.08
22.63
24.63
25.55
25.40
25.18
24.53
23.54
22.34
7.69
18.35
24.15
25.73
26.48
26.26
26.16
25.65
24.55
23.44
7.84
19.05
24.59
25.91
26.49
26.21
25.93
25.26
24.16
23.00
9.60
21.78
25.95
26.96
27.46
27.13
26.89
26.32
25.16
23.97
10.08
21.79
25.88
26.96
26^7
26.64
26.16
25.63
24.27
23.18
11.90
23.12
26.48
27.14
27.53
27.14
26.85
26.22
24.77
23.63
11.47
22.21
25.53
26.18
26.36
25.95
25.57
24.73
23.33
22.25
earlier . . .
Not stated . .
19.85
15.21
19.28
14.65
19.94
15.93
19.04
15.54
20.51
18.49
20.31
18.34
17.48
19.25
16.05
17.40
Total . . .
20.29
20.17
21.54
21.31
22.80
22.64
23.29
22.27
1916 a n d
later . . . .
1911-1916 . .
1906-1910 . .
1901-1905 . .
1896-1900 . .
1891-1895 . .
1886-1890 . .
1881-1885 . .
1876-1880 . .
1871-1875 . .
1866-1870 . .
1865 and
1932
1931
Year of birth
1934
30.VI
31.XII
30. V I
31.XII
30.VI
30.VI
.
.
.
.
.
.
.
.
.
.
.
.
.
9.47
13.29
23.25
26.01
26.62
26.86
26.22
26.10
25.24
24.01
22.73
16.32
20.34
8.05
11.91
22.17
24.89
25.44
25.50
25.01
24.54
23.73
22.47
21.37
15.05
19.94
6.15
13.97
22.58
24.84
25.26
25.46
25.00
24.69
24.06
22.67
21.62
16.94
16.49
5.50
13.01
21.44
23.91
24.27
24.28
23.78
23.22
22.46
21.05
20.38
15.77
16.59
6.00
14.72
21.34
23.64
24.12
24.38
23.90
23.57
22.72
.21.43
20.54
16.97
20.43
. 6.96
15.59
20.79
23.06
23.45
23.63
23.13
22.82
21.88
20.49
19.74
17.82
19.63
. . . .
22.85
21.53
21.82
20.54
20.70
20.10
1916 and l a t e r .
1911-1916
. .
1906-1910
. .
1901-1905
. .
1896-1900
. .
1891-1895
. .
1886-1890
. .
1881-1885
. .
1876-1880
. .
1871-1875
. .
1866-1870
. .
1865 a n d earlier
Not stated . .
Total
1933
.
.
.
.
.
.
.
.
.
.
.
.
.
121
CZECHO-SLOVAKIA
TABLE XV (b).
AVERAGE DAILY W A G E :
FEMALES
(In crowns)
1927
Year of birth
30. V I
1929
1928
31.XII
1930
30.VI
31. X I I
30.VI
31.XII
30.VI
31. XII
1916 and
later . . . .
1911-1916 . .
1906-1910 . .
1901-1905 . .
1896-1900 . .
1891-1895 . .
1886-1890 . .
1881-1885 . .
1876-1880 . .
1871-1875 . .
1866-1870 . .
1865 and
earlier . . .
Not stated . .
8.75
8.95
11.73 12.47
13.98 14.64
14.91 15.66
15.57 16.37
15.76 16.66
15.65 16.52
15.35 •16.19
14.81 15.65
14.42 15.11
9.76
13.03
14.92
15.75
16.35
16.49
16.34
15.91
15.37
14.81
10.01
13.62
15.45
16.27
16.90
17.06
16.88
16.45
15.89
15.21
10.31
13.24
14.82
15.68
16.30
16.40
16.22
15.67
15.10
14.62
10.68
13.52
15.09
16.07
16.72
16.89
16.70
16.14
15.51
14.99
11.02
13.66
15.01
15.62
16.11
16.23
15.87
15.41
14.57
14.14
11.05
13.50
14.89
15.64
16.16
16.31
15.98
15.40
14.73
14.15
11.98
11.72
12.40
11.30
12.58
11.44
12.33
11.80
14.52
13.17
13.20
13.21
13.04
12.20
13.15
12.22
Total . .
13.35
13.88
14.03
14.36
13.93
14.24
14.01
13.93
1932
1931
Year of birth
30.VI
31.XII
10.02
1916 and later . .
1911-1910
. .
1906-1910
1901-1905
1896-1900
1891-1895
1886-1890
1881-1885
1876-1880
1871-1875
1866-1870
1865 and earlier
Not stated . .
13.66
14.73
15.21
15.51
15.62
15.16
14.59
13.93
13.42
12.83
11,24
9.85
11.00
13.36
14.48
15.09
15.45
15.44
15.02
14.50
13.89
13.38
12.90
10.93
Total
13.64
13.37
A A A Ci
Í ± .X if
1933
1934
30.VI
31.XII
30.VI
30.VI
8.07
12.95
13.80
14.11
14.34
14.32
13.87
13.34
12.78
12.46
13.13
9.78
8.00
10.99
12.84
13.75
14.14
14.39
14.32
13.90
13.39
12.87
12.56
13.10
11.15
8.18
10.96
12.59
13.23
13.49
13.62
13.52
13.19
12.74
12.21
12.10
12.63
11.84
8.39
11.28
12.76
13.35
13.54
13.66
13.56
13.14
12.63
12.08
12.03
12.98
11.58
12.69
12.61
12.20
12.20
in
ST
122
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
The average contributions calculated by the Central Institution each
year, for quinquennial age groups and for each sex, arc reproduced
below:
TABLE XVI ( a ) .
AVERAGE W E E K L Y
CONTRIBUTION - .
MALES
(In crowns)
Year of birth
1916 a n d
later . .
1911-1916
1906-1910
1901-1905
1896-1900
1891-1895
1886-1890
1881-1885
1876-1880
1871-1875
1866-1870
1865 a n d
earlier .
Not stated
.
.
.
.
.
.
.
.
.
.
.
1927
.
.
.
.
.
.
.
.
.
.
.
. .
Total . . .
1928
1929
1930
1931
1932
1933
1934
1935
4.51
5.74
6.67
6.96
7.09
7.06
7.03
6.92
6.74
6.55
3.51
5.75
6.59
6.80
6.88
6.82
6.76
6.64
6.41
6.08
3.90
6.02
6.69
6.84
6.88
6.79
6.73
6.60
6.35
6.10
—
3.21
4.11
6.04
6.59
6.70
6.73
6.63
6.56
6.43
6.15
5.91
2.85
4.20
5.91
6.39
6.48
6.53
6.40
6.32
6.18
5.91
5.70
2.86
4.31
5.66
6.15
6.24
6.27
6.16
6.08
5.91
5.65
5.49
2.93
4.30
5.43
5.92
6.01
6.04
5.92
5.84
5.66
5.39
5.31
2.98
4.28
5.29
5.75
5.82
5.84
5.72
5.61
5.42
5.17
5.28
5.93 6.03
5.22 . 5.44
5.76
4.80
5.08
4.57
5.45
4.55
4.82
KAA
O.\J\J
f r o
5.13
5.18
4.87
4.44
6.32
5.99
'6.08
5.97
5.78
5.55
5.34
5.16
—
4.40
5.20
6.31
6.69
6.90
6.88
6.87
6.78
6.60
6.41
6.11
TABLE XVI (b).
—
•
—
AVERAGE W E E K L Y C O N T R I B U T I O N :
FEMALES
(In crowns)
Year of birth
1916 a n d
later . .
1911-1916
1906-1910
1901-1905
1896-1900
1891-1895
1886-1890
1881-1885
1876-1880
1871-1875
1866-1870
1865 a n d
earlier .
Not s t a t e d
1927
1928
1929
1930
1931
1932
1933
1934
1935
.
.
.
.
.
.
.
.
.
.
.
4.43
4.66
4.92
5.08
5.20
5.25
5.24
5.20
5.14
5.09
4.51
4.80
5.04
5.20
5.32
5.36
5.33
5.28
5.22
5.16
3.39
3.94
4.30
4.50
4.66
4.71
4.67
4.55
4.42
4.31
3.50
4.03
4.33
4.50
4.62
4.65
4.58
4.45
4.32
4.19
—
3.17
3.51
4.01
4.26
4.39
4.47
4.49
4.39
4.28
4.13
4.02
2.96
3.46
3.90
4.11
4.21
4.26
4.27
4.17
4.06
3.93
3.85
2.95
3.44
3.81
3.98
4.06
4.10
4.09
4.00
3.90
3.78
3.75
2.78
3.30
3.66
3.83
3.89
3.93
3.92
3.85
3.72
3.64
3.69
2.60
3.12
3.49
3.62
3.66
3.69
3.67
3.59
3.48
3144
3.63
. .
. .
4.76
4.57
4.80
4.65
4.30
3.82
4.01
3.61
3.98
3.47
4.03
3.39
3.93
3.63
3.94
3.53
4.28
3.25
Total . . .
4.89
4.98
4.13
4.13
4.03
3.87
3.75
3.57
3.35
.
.
.
.
.
.
.
.
.
.
.
—
—
—
123
CZECHO-SLOVAKIA
The annual number of contributing days, divided by 365 (or 366),
gives the number of " complete contributors ", that is to say the
hypothetical number of insured persons contributing every day in the
year which corresponds to the given number of contributing days.
The number of " complete contributors " is calculated each year, on
the one hand for each of the quinquennial age groups and for each sex
and on the other hand for each wage class and for each sex. Only
the total figures for each sex are reproduced below.
TABLE X V I I .
ANNUAL NUMBERS OF FULL
Year
1927
1928
1929
1930
1931
1932
1933
1934
1935
CONTRIBUTORS
Males
Females
Total
1,361,775
1,462,026
1,444,207
1,368,274
1,299,587
1,152,815
1,030,335
1,021,001
1,032,875
788,151
824,732
825,787
793,462
765,185
712,635
675,928
673,227
674,895
2,149,926
2,286,758
2,269,994
2,161,736
2,064,772
1,865,450
1,706,263
1,694,228
1,707,770
There have also been calculated for the " complete contributors "
of each sex:
(1) The distribution according to wage class 1 ; and
(2) The average annual contributions, which are reproduced below:
Average annual contribution
l'or à " complete contriti litor "
Year
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1
•
Men
Women
Total
327
339
312
317
311
302
289
279
269
(in crowns)
259
265
215
216
210
203
196
186
175
302
312
277
280
274
264
252
242
232
See Bibliography, No. 9, table V, p. 158.
•
124
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
The average annual numbers of contributing days have been calculated
by relating the number of contributing days paid each year to the
registered population *. In the course of the preparation of the actuarial
balance-sheet at 1 January 1930, the average numbers given below
were calculated, for each wage class, on the basis of the contributions
paid in 1929 and the age distribution of the registered population 2 .
TABLE
AVERAGE
XVIII.
ANNUAL
NUMBER
OF
CONTRIBUTION
DAYS
Average contribution days per insured person
and per annum in class
Year of birth
Aa
Ab
B .
C
D
Total
Males
L a t e r t h a n 1910. .
1906-10
1901-05
1896-1900
1891-95
1886-90
1881-85
1876-80
1871-75
1866-70
1865 a n d earlier .
Total
. . . .
190.77
31.72
14.55
11.91
12.69
13.45
14.47
16.92
19.65
26.59
47.67
30.25
28.75
23.60
21.95
20.41
21.56
21.70
22.66
25.92
29.60
29.65
46.91
65.09
54.94
50.18 '
45.89
47.43
46.95
49.85
54.57
61.18
51.63
15.31
47.71
52.82
48.31
44.75
44.57
43.53
44.77
45.83
48.02
35.65
9.74
61.78
116.46
134.95
141.27
137.17
130.59
122.74
105.81
86.49
82.53
292.98
235.05
262.37
267.30
265.01
264.18
257.24
256.94
251.78
251.88
247.13
43.78
25.22
53.59
43.14
95.23
260.97
Females
L a t e r t h a n 1910. .
1906-10
1901-05
1896-1900
1891-95
1886-90
1881-85
1876-80
1871-75
1866-70
. . . . .
1865 and earlier .
Total
1
2
. . . .
151.77
112.68
85.87
72.35
63.24
64.82
65.70
73.09
77.57
83.78
68.09
55.96
73.01
69.61
59.36
53.61
51,39
48.79
48.55
46.57
47.41'
36.59
43.68
73.17
80.43
79.41
79.49
85.30
85.84
85.21
79.75
77.95
66.75
7.78
23.11
35.50
40.13
43.93
47.44
46.20
43.55
37.83
33.95
22.00
1.58
6.49
11.55
15.16
18.07
18.93,
16.77
13.68
11.00
9.29
9.12
260.77
288.46
282.96
266.41
258.34
267.88
263.30
264.08
252.72
252.38
202.55
99.94
61.54
71.81
29.57
9.91
272.78
Bibliography, No. 10, years 1931-1932, p. 46. '
The actuarial balance-sheet at 1 January 1930, is based on the average
figures for each year of age, deduced by interpolation from thefiguresin table
XVIII. See Bibliography, No. 6, pp. 67-68.
CZECHO-SLOVAKIA
125
The sums of money corresponding to the registered contribution
days are calculated each year for each sex, in quinquennial age groups
and for the various types of sickness insurance institution. The annual
total of the contributions actually received by the Central Institution,
excluding the contributions paid by the State in respect of insured
persons carrying out their military service, amounted to:
Year
Thousand
crowns
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
332,086
655,539
721,305
634,526
614,511
573,575
496,467
429,313
415,493
408,080
454,094
535,229
§ 2. — State Grants
A State subsidy is added to every payment made under the head
of pensions for invalidity, old age, widows, widowers or orphans, subject
to the following conditions:
The State subsidy is not paid if, during the preceding fiscal year,
the pensioner's income, excluding the social insurance pension, exceeded
the sum exempt from income tax (7,000 crowns). When the pensioner,
in addition to receiving the social insurance pension, is in receipt of
a pension under the Act relating to the compensation of men disabled
in the war or of any other pension from a public fund, the State subsidy
is only granted to the extent of its excess over such further pension.
Aliens are entitled to the State subsidy only if their country of origin
has a scheme of insurance against invalidity, old age and death and
if in this country the State pi ovides supplementary pensions tho benefits
of which are available to Czecho-Slovak citizens.
State subsidies are calculated on the basis of fixed annual amounts
according to the category of pension, as follows:
ANNUAL AMOUNT OF S U B S I D Y
Crowns
Invalidity or old-age pension
Widow's or widower's pension
Half-orphan's pension
Full orphan's pension
'
500
250
100
200
Since the State subsidies are proportional to that element entering
into the constitution of all classes of pension which is independent of
126
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
the duration of insurance, it is evident that the methods and formulae
which are employed in calculating the present values in respect of the
various elements of benefit give also the present values of the State
subsidies. Reference should therefore be made to section 3 below.
The annual sums payable by the State on account of the subsidies
were estimated in the investigations
preparatory to the 1924 Act as
indicated in the table below 1 :
TABLE XIX.
ANNUAL AMOUNTS OF STATE INDIVIDUAL SUBSIDIES
(Estimates in the investigations preparatory to the 1924 Act)
Number of years
since coming
into operation
of the scheme
5
6
7
9
10
11
12
13
14
15
16
17
18
19
20
Subsidies added to
Invalidity
pensions
4,535
13,097
20,875
28,181
35,130
41,773
48,141
54,257
60,142
65,562
70,997
76,505
81,651
86,664
91,567
96,392
Widows'
and orphans'
pensions
In thousands of crowns
1,594
535
5,061
1,611
9,014
3,689
13,308
6,980
17,816
9,385
22,395
11,506
26,893
13,492
31,204
15,533
35,238
17,385
38,940
19,341
42,304
20,944
45,328
22,569
48,015
24,087
50,370
25,566
52,407
27,012
54,139
28,436
Old-age
pensions
Total i
6,664
19,769
33,578
48,469
62,331
75,674
88,526
100,994
112,765
123,843
134,245
144,402
153,753
162,600
170,986
178,967
i It was also estimated that the annual total of State individual subsidies would reach
508,529 thousand crowns after 50 years.
In addition the State undertakes the payment of contributions
during periods of military service: according to estimates included in
the investigations mentioned above, this will entail an annual expenditure of 17.4 million crowns.
The State also helps by bearing the cost of setting up and administering
the insurance courts (including the Superior Insurance Court) and by
granting various privileges such as the exemption from taxes.
1
A second estimate brought out figures slightly different from these in
respect of the subsidies to invalidity, widows', widowers' and orphans' pensions. See Bibliography, No. 3, p. 163.
127
CZECHOSLOVAKIA
EXPERIENCE
The State subsidies which have been added to the various classes
of pension have entailed the payment by the State of the following
annual sums:
TABLE X X .
STATE I N D I V I D U A L
SUBSIDIES
(Annual amounts in thousands of crowns)
Year
1929
1930
1931
1932
1933
1934
1935
1936
1937
Invalidity
pensions
Olfl-age
pensions
Widows'
and
widowers'
pensions
Orphans'
pensions
Total
172
2,355
8,580
19,336
32,232
46,505
60,346
67,395
70,500
1
5
230
2,136
5,320
8,967
12,507
15,438
17,947
159
744
1,461
2,310
3,224
4,272
5,359
6,434
7,419
188
836
1,519
2,241
3,065
4,005
4,903
5,870
6,502
519
3,939
11,790
26,023
43,841
63,749
83,116
95,137
102,368
§ 3. — Benefits
First of all the various species of benefit will be passed in review,
and in each case the rules will be set forth which determine the conditions of award and the amount of the sums granted.
CONDITIONS OF AWARD AND COMPUTATION OF BENEFITS
Invalidity
Pension
Title to pension is determined on the basis of loss of earning capacity:
an insured person who, by reason of sickness or infirmity, is incapable
of earning at least one-third of the sum usually earned by a healthy
person in the same district, acquires the right to an invalidity pension.
The invalidity pension consists of a fixed sum and additions varying with the duration of insurance. The invariable sum, which was
fixed at 500 crowns per annum by the 1924 Act, was increased by
the 1928 Act to 550 crowns per annum. The additions in each class
are proportionate to the number of weekly contributions. The 1924
A c t 1 fixed the addition in respect of each weekly contribution at
20 per cent, of it, that is to say at:
In class A, 0.86 crowns
,. „ B, 1.14 „
„ „ G, 1.42
„
» » D, 1-76 „
1
The technical investigations which led up to this Act are based on additions which bear to the contributions the ratio of 20 to 100.
128
ACTUARIAL T E C H N I Q U E
AND F I N A N C I A L
ORGANISATION
The additions have been modified by the 1928 Act which laid down
the following rates, as from 1 January 1929:
Wage class
Aa
Ab
B
C . .
D
Addition in respect
of each weekly
contribution
.
0.60
0.85
1.15
1.40
1.75
Old-Age Pension
The old-age pension normally falls due at the age of 65. However,
postponement has been provided for in the following cases:
(1) Under the 1924 Act, when the insured person continues to earn
a wage equal to one-third of the sum usually earned;
(2) As from the date of coming into force of the 1928 Act, when
the wage equals one-half of the sum usually earned.
The amount of the old-age pension is calculated in the same way
as the amount of the invalidity pension.
Widow's Pension
Under the 1924 Act a widow is entitled to a pension when she is
suffering from invalidity which is defined as either general incapacity
for work to the extent of at least two-thirds, or inability to attend to
her household duties. The 1928 Act extends the title to pension to:
(1) a widow who maintains not less than two children under age 17
of the insured person; (2) a widow who has reached age 65. This
age limit was reduced from 65 to 60 by the 1934 Act.
The amount of the widow's pension is equal to half the invalidity
or old-age pension. In the event of the widow remarrying she forfeits
her title to pension but receives a lump sum payment equal to three
times the yearly amount of her pension.
Widower's Pension
A widower is not entitled to pension unless he was incapacitated at
the date of the death of his wife so that the maintenance of the family
fell principally on her shoulders. The amount of the widower's pension
is calculated in the same way as that of the widow's pension.
Orphan's Pension
Every half-orphan is entitled, up to age 17, to a pension whose
amount is equal to two-tenths of the pension which the insured person
received or could have claimed in case of invalidity. The amount of
the pension is doubled in the case of a full orphan.
Lump Sum Benefit at Death
The lump sum payment at death is made when the insured person
leaves no widow (or widower) entitled to a pension, either because
death occurred before the expiration of the qualifying period or because
she (or he) did not fulfil the statutory conditions.
CZECHOSLOVAKIA
129
The payment is made in the following order of priority: husband or
wife; children, including grandchildren, illegitimate children, adopted
children, foster-children and step-children; parents or brothers and
sisters of the deceased.
Under the 1924 Act the capital sum payable on death was equal to '
one year's amount of the invalidity or old-age pension which the insured
person was receiving or could have claimed.
By virtue of the 1928 Act, when the insured person dies before the
expiration of the qualifying period, the capital sum payable on death
is fixed' at:
In class Aa, 550 crowns'
„ Ab, 600
„ „ B, 650
„'
,, C, 700
„ „ D- '50
„ .
If the qualifying period has been completed the capital sum payable
on death is assessed, as under the former Act, at one year's amount
of the invalidity or old-age pension, provided that it is not less than
the amounts mentioned above (550 — 750).
Educational Allowance
Every invalidity or old-age pension is increased by 10 per cent, for
each child aged less than 17 years maintained by the pensioner (the
term " children " includes legitimate and illegitimate children, adopted
children, foster-children, grandchildren and step-children).
Dowries
Since the coming into force of the 1928 Act, every insured woman
who has completed the waiting period is entitled on marriage to a
dowry whose amount is fixed at:
In class Aa,
„ „ AÔ,
„ B,
„ „ C,
„ „ D,
400 crowns
450
„
500
550
600
In the event of remarriage an insured woman is entitled to a further
dowry provided that she was insured for not less than five years before
the second marriage.
Supplementary Pensions in Respect of Insured Persons
who were Born before 1 January 1899
By virtue of the 1934 Act a supplementary invalidity or old-age
pension is granted to every insured person born before 1 January
1899, on whose behalf there have been paid up to 31 December 1931
at least 700 daily contributions (or 100 weekly contributions). This
supplementary pension is equal to one-third of the average annual
addition which could have been acquired between the attainment of
age 27 and 1 July 1926. The calculation of this average annual addition
is made on the basis of the additions actually acquired between 1 January
1927 and 31 December 1931. Benefits whose amount is assessed as a
fraction of the invalidity or old-age pension are increased pro rata
to the supplementary invalidity or old-age pension defined above.
9
130
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
Qualifying Period
Title to all benefits, except to the lump sum death benefit, is subject
to the serving of a qualifying period. This qualifying period, which
in the preparatory investigations consisted of 200 contribution weeks,
was fixed by the 1924 Act at 150 contribution weeks and reduced to
100 contribution weeks by the 1928 Act. Under the 1934 Act it
is no longer based on the number of contribution weeks but on the
number of contribution days, which must be at least equal to 700.
Periods of military service, as well as those during which the insured
person has contributed to other schemes of insurance against invalidity,
old age and death (miners, salaried employees or public officials) are
deemed to be contribution periods for the purpose of the qualifying
period.
Maintenance of Right to Benefits
The maintenance of benefit rights in the insurance against invalidity,
old age and death, which in the initial legislation was provided for the
period of one year, was extended to eighteen months by the 1928 Act.
The insured person still had the option of preserving indefinitely his
benefit rights, in the insurance scheme against invalidity, old age and
death, up to the amount corresponding to the contributions paid,
provided that he paid a renewal fee of 10 crowns a year. By virtue
of the 1934 Act benefit rights are maintained for a period equal to
one-fourth of the period corresponding to the contributions paid, with
a minimum of two years; this minimum is extended to five years in
case of unemployment. The provisions regarding renewal fees do not
apply after 1 July 1934, except in cases where such payments were
made before that date.
Maintenance of Rights of Insured Persons who Pass from the Workers'
Scheme of Insurance against Invalidity, Old Age and Death to another
Scheme of Social Insurance or vice versa
By virtue of the 1924 Act, when a worker changes his employment
and consequently ceases to be insurable in the workers' scheme of
insurance against invalidity, old age and death, the Central Institution
shall pay to the new insurance institution a "transfer value " representing the value of the rights acquired by the insured person in so far
as these are covered by the insurance contributions paid on his account.
In consideration of this transfer value the insured person is granted a
reduction of waiting period in the new insurance scheme and eventually
the right to increased benefits. Similar provisions apply when the
movement is in the reverse direction, that is to say when a worker
leaves another scheme of social insurance and becomes insured under
the Central Institution.
In order to calculate the transfer value use is made of the formula
introduced by Küttner 1 for. obtaining the value of a reduced valuation
reserve :
í
z
1
" Die Rückkaufs- und Abfmdungswerte bei vorzeitiger Lösung des Versicherungsverhältnisses." Mitteilungen der Vereinigung schweizerischer Versicherungsmathematiker. 7. Heft, Berne, 1912.
CZECHOSLOVAKIA
131
where tV- represents the premium reserve in respect of an insured
person who entered at age £ and who has paid a premium P 5 for t years ;
tWs represents the reduced premium reserve by Kiittner's method ;
-P represents the general average premium 1 which has actually been
paid on behalf of the insured person; and P ç represents the fixed
premium calculated individually for an insured person entering at age \
The reserves are calculated in two portions:
corresponding to the fixed portion of the pension, that is to say the
basic sum; and
Ps
corresponding to an addition which increases by unity for each contribution year that has been completed.
The final figure adopted as the transfer value is given by the formula 2
where * represents the total contributions paid, n the total number of
contribution weeks, and where, in estimating on average the additions
s
to one-fifth of the relative contributions 3, — represents the average
5»
value of the addition corresponding to one contribution week, and
10 s
represents the average value of the addition corresponding to
n
50 contribution weeks, or one contribution year.
In order to facilitate the application of this formula scales 4 have
been constructed which give for each sex separately:
(1) The value of tWc corresponding to a basic sum of 500 crowns,
according to the number of completed contribution years (of
50 weeks) and according to the quinquennial age group within
which the insured person falls at the date of calculation of the
transfer value.
1
2
See later, pp. 149-152.
Prof. V. LENZ: O Pfevedních Cástkách v Sociálním Pojistëni. Rozpravy
Jednoty
pro vëdy Pojistné. Cislo 4. Prague, 1928.
3
Under the 1924 Act the addition in respect of each weekly contribution is
exactly equal to one-fifth of the contribution : this proportion was maintained
only
approximately as from the date of coming into force of the 1928 Act.
4
Regierungsverordnung vom 29. November 1928. (Sammlung der Gesetze und
Verordnungen des ¿echoslovakischen Staates. 1928, 69. Stück.)
132
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
(2) The values of t W | corresponding to addition which grow by
10 crowns for every completed contribution year, according to
the number of contribution years (of 50 weeks) and according
to the quinquennial age group within which the insured person
falls at the date of calculation of the transfer value.
Because of the amendments introduced by the 1928 Act these scales
have ceased to operate as from 1 January 1929. It was found that
the number of transfers was very large and, since it was feared that
the calculation of the transfer values would become more and more
.onerous, efforts were made to simplify the original method while at
the same time adapting it to the provisions of the new Act. It was
noticed that the figures in the scales used before the end of 1928 varied
comparatively little with the age of the insured person at the moment
of transfer. This led to the construction of a new scale 1 from which
could be calculated (for each sex separately) an approximation to the
transfer value by taking into account only the number of contribution
weeks in respect of each wage class.
As a further simplification of the administrative processes consideration has been given to a more fundamental reform of the financial
mechanism relating to transfers: the abandonment of transfer values
and the sharing of the cost of benefits, at the moment of the occurrence
of the event insured against, among the various institutions to which
the insured person belonged. This reform has been the subject of
various investigations but at the present time it still remains no more
than a proposal.
Lapse of Rights
The period beyond which right to claim lapses is five years for all
classes of pension and two years for marriage allowances and lump-sum
payments on death.
Amounts of Invalidity and Old-Age Pensions and Percentages
of Wages which they Represent
The amounts of invalidity or old-age pensions depend on the duration
of insurance and their calculation follows directly from the legislative
provisions which we have enumerated above. By way of example
we reproduce in table XXI below:
(1) The amounts of the invalidity pension after a given number of
years each containing 50 weekly contributions, including the
State subsidy, but excluding other allowances and additions
which may be added to it:
(2) The percentages which these amounts bear to the average wage
on the. basis of an average wage of:
In class Aa, 2,600 crowns
„ „ *A.b, 4,200 „
„ B, 5,400
„ „ G, 7,650
,, » D, 9,450 „
1
Regierungsverordnung vom 18. Februar 1937. (Sammlung der Gesetze und
Verordnungen des Cechoslovakischen Staates. 1937, 10. Stück.)
133
CZECHOSLOVAKIA
TABLE X X I . —
c
I N V A L I D I T Y P E N S I O N : AMOUNT A N D
OF AVERAGE WAGE
PERCENTAGE
Number of contributions paid
100
500
1,000
1,500
2,000
2,500
Amount of invalidity pension in crowns
Aa
Ab
. .
. .
B . . .
C . . .
D . . .
1,110
1,135
1,165
1,190
1,225
1,350
1,475
1,625
1,750
1,925
1,650
1,900
2,200
2,450
2,800
1,950
2,325
2,775
3,150
3,675
2,250
2,750
3,350
3,850
4,550
2,550
3,175
3,925
4,550
5,425
Percentage ratio oí invalidity pension to average wage
Ao
Ab
B .
C .
D .
.
.
.
.
.
.
.
,
.
.
42.6
27.0
21.6
15.6
13.0
51.9
35.1
30.1
22.9
20.4
63.5
45.2
40.7
32.0
29.6
75.0
55.4
51.4
41.2
38.9
98.1
75.6
72.7
59.5
57.4
86.5
65.5
62.0
50.3
48.1
The supplementary pensions granted in respect of insured persons
born before 1 January 1899, which correspond to the contributions
paid, continuously in the same class, between 1 January 1927 and
31 December 1931, are also given.
TABLE XXII. —• S U P P L E M E N T A R Y B E N E F I T S I N R E S P E C T
PERSONS BORN B E F O R E 1 J A N U A R Y 1 8 9 9
OF
INSURED
(In crowns)
Age of insured pension
on January 1926
30
35
40
45
50
55
60
Amount of supplementary benefit on the basis
of continuous contributions between 1 January 1927
and 31 December 1331 in class
Aa
Ab
B
C
D
36.57
97.52
158.47
219.42
280.37
341.32
402.27
44.37
118.32
192.27
266.22
340.17
414.12
488.07
60.03
160.08
260.13
360.18
460.23
560.28
660.33
73.08
194.88
316.68
438.48
560.28
682.08
803.88
91.35
243.60
395.85
548.10
700.35
852.60
1,004.85
ESSENTIAL FACTORS IN THE CALCULATION OF THE PRESENT
VALUE OF BENEFITS
The essential factors which enter into the calculation of the present
value of benefits may be expressed as a certain number of unit present
values the method of calculation of which will now be considered.
134
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
The unit present values will be classified according to the nature of
the benefit principally concerned.
,
Old-Age Pension
The present value of the right to an old-age pension—of one unit,
payable as from age 65—to an insured person now aged x is given by
the expression
aa
65
aa
If the payments are monthly or weekly the commutation function
N"a must be adjusted in accordance with the formula
NT' = N
where 8 is calculated by the formula
% =
1 -(- i
2
? + hi
and consequently has one of the following values:
Rate of interest (4 per
cent.)
Rate of interest (4% per
cent.)
- For monthly
payments
For weekly
payments
S12 = 0.4648
S62 = 0.4969
Si2 = 0.4656
In the case of postponed pensions, for the unit present value
is substituted the following expression
a
aa(p)
x
ns-x\ax
aa
2^N^
= =
D
To take the case of an insured person who each year acquires the
right to a unit addition by virtue of the payment of his contributions.
The present value of the right to such additions, for an insured person
aged x, is calculated by the formula
<65
aa
es-xi^x
(66 -
x)
C 5 _ x | ar
if the age at which the old-age pension is granted is fixed at 65; or
135
CZECHO-SLOVAKIA
2.(Ä + I-X)
aa(p)
a.
0LhK
Ä=65
= —
aa
if postponement of pensions is taken into account.
Invalidity
Pension
The present value of a unit invalidity pension in course of payment
may be obtained by two methods which will now be described.
In the first method the basic function is the probability of cessation
of invalidity ^m+h mentioned in Chapter 1 1 .
It is necessary to make a distinction between two cases.
(1) Where the duration of invalidity exceeds 10 years, the calculation
is made by the continuous application of the formula
a* = 1 + v (1 — ax) a.lx+1
starting from a*101 which is taken to be equal to unity.
(2) Where the duration of invalidity is not greater than 10 years,
the use of the identity a j x ] + u = &x+11 and of the continuous
formula
a
M + ft =
1 +
W (1
Gixi+k)
a
[ x ] + ft+i
will finally produce a M which represents the present value at
the moment when the unit pension is granted.
The second method is based on the table ¿ ra+fe of survivorship of
invaliditv pensions corresponding to the rates of cessation of invalidity
The commutation columns are constructed in the usual way
p.i
U
[s]+h
—
Tt
[x]+k
l
X+k
lyji
W+ft
V
iN
~
^ ^
¿¿¿
k
„ t
[i]+fi
U
and finally the present value of unit pension is obtained by the formula
NÍ.
a
[acJ+ft —
i
[x] + k
n
u
The values of a M calculated on the basis of the probabilities of cessation of invalidity mentioned above, with interest at 4 per cent., show
a clearly defined maximum between ages 55 and 60 for males and
1
2
See p . 88.
See C h a p t e r I, p . 88.
136
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
about age 45 for females. Certain values of a ^ which are sufficient
to demonstrate the variations in value are reproduced below.
Present value of unit invalidity pension
at date of grant
Age at grant
Males
3.4623 .
4.6623
5.7921
6.2925
6.71587.0149
7.0339
6.0584
4.3460
2.7234
1.4288
1.0000
20
30
'40
45
50
55
60
70
80
90
100
101
Females
5.4544
9.1799
10.6842
10.7995
10.6384
10.2130
9.5118
7.2959
4.7399
2.8620
1.4490
1.0000
The intermediate present values a^+j] are obtained by taking the
mean
1
/ í
2 VaM
+
a
[x+i])
Account is taken of the frequency of payments by applying the
coefficients 8„ defined above.
«12)
a
__
i
L
[x+i) — a[x+i)
The present value of a unit invalidity pension in the course of being
acquired is obtained in the following manner:
The commutation functions
Da
aa
I
•
x
l
x+i
V
a
i(i2>
[x+i]
are first obtained and then the corresponding values of N"' and Sx
are calculated.
The present value of a unit invalidity pension in the course of being
acquired is then obtained immediately by the formula
ai
•
D:
As a result of the 1934 amendments an adjusting coefficient has been
introduced into the calculation of SLJ [6]. It was necessary to take
into account the suspension of the right to an invalidity pension for
periods during which the insured person was in receipt of sickness
insurance benefit. By means of statistical investigations dealing with
25,000 invalidity pensions paid during the years 1929 to 1932 the Central
CZECHO-SLOVAKIA
137
Institution calculated the following values of the average number of
months during which paymenf of the invalidity pension was suspended
—so as to avoid duplication of benefits:
Average number ol months during which the
right to invalidity pension is suspended
Males
|
Females
Age
7.68
7.50
7.23
7.05
6.65
6.65
5.82
4.58
3.23
2.41
U n d e r 20
21-25
26-30
31-35
36-40
41-45
46-50
51-55
56-60
61 and over
.
9.22
8.31
8.39
7.28
6.52
5.61
4.75
3.43
2.38
2.20
•
These averages, expressed as fractions of a year and rounded off to
the nearest unit, have been taken as adjusting coefficients ? and applied
at the same time as the factors 8 in order to obtain from a M a new
function , a M in which account is taken of the average suspension
of the invalidity pension and at the same time of the payment by
monthly instalments. The calculation is made by means of the following
formula:
»| a W
„ (1 — o) 4] + ? hW + i
= (l — ? ) a w + ? ii a w
I,M
in which S12 has the value of 0.4656 on the basis of interest at 4% per
cent.
Starting from the value thus obtained for „¡aL, the commutation
functions D"1 N" 1 S^1 and, from them, the present value of the unit
annuity SLX1 were obtained by the formulae which we have mentioned
above.
In order to give effect to the deferment of the right to invalidity
pension during the waiting period of t years the following formula was
used:
Nai
'I'
aa
To take again the case of an insured person who acquires each year,
after the end of the waiting period, the right to a unit addition by
virtue of the payment of his contributions. The present value of the right
to such additions, for an insured person aged x, is calculated by means
of one of the following formulae:
(1) On the assumption that all insured persons claim their old-age
pension and consequently cease to contribute at age 65:
<65
(+ll c
ai
—s
J
x+t+
D1
"S'
• 138
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
(2) Taking into account the insured persons who postponed the
claiming of their old-age pension and who consequently continue
to contribute after age 65:
^ ¿ K ft
ft=65
^X + t + l
aUp)
„-IB)
t + l|a.V
ö
ft + l
aa
"x
which may otherwise be written
<05
ai(p)
t+i|ax
m
t+i|ax
—
J ¿ | ^ft + 1 fk + 1
ft=65
I
aa
introducing the coefficients yk obtained from the coefficients aft
by the following linear equations:
Y„ = 1 —
(66
,
OÍ
65
y
'
= 1 — a
1 67
— a
65
,
66
etc.
'
Widow's Pension
The present value of the right to unit pension or to a lump sum on
death in respect of the wife of an insured man who becomes a widow
at age y is represented by the formula
Fy = ~ (v;<n25) c + vynfa w;p 4 + vf + vr + vn.
This value is made to refer to the age of the insured man at death, x,
by means of the relationship obtained above between the age of the
insured man, x, and the average age of the wife, yx, and for the sake
of simplicity Fy is written Fx( y
The present value of the right to a widow's pension or to a lump sum
on death, of unit amounts, acquired by an insured person aged x is
the sum of two parts corresponding to the following alternatives.
(1) If the insured person dies without having been invalid: the
following expression is obtained, analogous to a commutation
function
T^a'
U
x(v)
J- jaa
aa
ly "x Çx
V
x+h
i-rp
[^xiy)
vm
Cx
_j_ V
T ^ x+uy)
'/'m
\
ix+i)
i
(2) If the insured person dies after having become an invalid: starting from the expression
i
^ i d\Lx]+h
u
x+k+i
( v
\rx+Uy)
..m
^x+k
2 DÍ.M
,
~r
-p
x+k+My)
r
Ym
\
^x+k+i)
139
CZECHOSLOVAKIA
in which
<*[!]+&
=
hxi+k ~~ hxi+h+i
an(
^ D[3E] = liX] v
;
we pass from the values of 6CMy), which relate to all cessations
of invalidity, to values of A* , relating only to cessations due
to death, by applying M. Tauber's adjusting coefficients, thus
A*xiy) - ^ ' x x{y) "
xiy)
Assuming
•p.a."
1
jaa
.
x+i
, . i
.i
\
and summing Dx(y) -+- Dx(y) we arrive at an expression D^ which
we can use as a commutation function D. Hence we obtain, by means
of the formula N" , = •£ D"
the present value of the right to a
widow's pension or to a lump sum on death, of unit amounts, acquired
by an insured person aged x, thus
• Na
^xly)
aa
^x
This method, which was adopted for the first estimates, was improved
during the investigations preparatory to the 1924 Act [3j. Use was no
longer made of the German figures representing the probability wnp
that at the moment of the death of an insured man his wife, aged ?/,
who was not then herself insured, would never become insured.
With the help of data from the general Census of the Gzecho-Slovak
population in 1921, values of Xxy.p were calculated, which represent the
probability that the widow of an insured man is not herself insured
at age y. The use of the probabilities GT"P has simplified in F the
term
-, Tnpa
np
Vy
wy
ai
ay
which has been replaced by
-.jupa
*y
ainp
3-y
where a" mp is obtained in the following manner:
p.ainp
u
v
N
ai»p
ainp
a„
_ai
—
u
=
s
__
np
v
y
D
V
ainp
aa •
'
.
140
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
In the course of the preparation of the actuarial balance-sheet as at
1 January 1930 the expression Fy was modified to give effect to the
new rules for the payment of widows' pensions introduced by the
1928 Act \
The values of F were calculated by applying the following formulae
m-.
(1) for y > 60
Fv - JV -
1
lvy
a„ -t- \y
T v J + vy
(a„ + ay
)
(2) for y < 60
aa
F, = i - 1 2 (1 - *„) v ; + 2 V f + v r p ) a r + 5y ^ ay(z>
.
+
in which a
a
» ,-npa r
ainp .
np /
* _i_
aa(i2)\ ] )
V
y
[|60-y a y
+ ^60 W - y | a y + <¡o-y|ay
jj j ,
(z)
is given by the weighted average
% ¡ J T <z)
aaU2>
2*?
'
2
5 represents the ratio of the number of widows maintaining two or
more children to the total number of widows 2 , and k indicates the
number of children aged z maintained by a widow aged y3.
Orphan's Pension
The calculations relating to orphans' pensions rest essentially on
formulae analogous to those applicable to widows' pensions, the most
important of which have just been described.
The present value of a unit orphan's pension in the course of payment,
for a child aged z, is calculated in the usual way from the life table lz,
thus
N r — N„
D,
The present value, at the death of an insured person aged x, of the right
to unit orphans' pensions is on the average
. ^ 1 Rx |l7-z a z
17„
1
a
3
See above, p. 128.
See Chapter I, p. 103.
See Chapter I, p. 103.
_
2= 0
141
CZECÌiO-SLOVAKfA
where the function k~ represents the number of children living corresponding to t h e number of insured males L^. 1 .
The present value of the right to unit orphans' pensions acquired by an
insured person aged x is calculated, as in the case of widows' pensions,
by distinguishing between two alternative assumptions:
(1) If the insured person dies in good health: t h e following expression is valued
Ma aa x+ì 17 (12>
a
¿a Qx V
x+è(z) 'i
(2) tf the insured person dies an invalid: we start with the expression
24
[x}+h v
D
[x]
X + k+i
17 (12)
à-x+k+Hz)
where d\,+k
and D[ x] have the same meaning as in t h e calculations for widows' pensions.
After applying M. Tauber's adjusting coefficients, thus
"A*
—
"(SC
T
•"*«> —
x
*^x(z)
j
values of the following expression are obtained
1 Ma •
~2 I'x
l
x
V
x+i / « . i
. w.i
A
\
oc(z) +
v
AK+KZ>J •
The results corresponding to these two assumptions are added together, thus
17
na
"xw
— 7 aa a a
— "x Çx
*"*"* 17
v
<12>
Jaa '
sc+i(z) + ~2 "x 'lx
3C+
^
_L
a
v
/17A'
_L
\ A«z> +
17
i'
s
i+iw) •
A
Thence is deduced
17
Na
=
2 "Da
and finally
a
^Xjzi
_ aa 1
x
IT
17
a
x<z)
_
d
which represents the present value of t h e right to u n i t orphans' pensions
acquired by an insured person aged x.
Education
Allowance
The valuation of the education allowances is m a d e on the basis of t h e
formulae used above for the calculations relating to widows' and orphans'
pensions.
(1)
Education
Allowance added to an Invalidity
Pension
The present value of t h e right to a unit education allowance payable
until the child attains age 17 is represented b y
jaa
lx
1
See Chapter I, p. 103.
•
y2 17
1X V
(12)
âx+i(z> .
142
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
Since the education allowance is cancelled if the pensioner dies or
ceases to be an invalid there must be deducted from the preceding
expression
•
jaa
Î4 17 ¿y i
%
xV
''x
^x+Jiz) •
The present value of the right to a unit education allowance, added to
an invalidity pension, acquired by an insured person aged x, is consequently calculated by means of the commutation functions
i7_ai
jaa •
i i11 <12>
17 ~ i
17
-,
ivrai
V
17
r\ai
and is represented by the formula
n
(2)
ai
IN*
'wa
Education Allowance added to an Old-Age Pension
The present value of the right to a unit education allowance, added
to an old-age pension, acquired by an insured person aged T, is represented by
17
a
17 aa
y^aa
Í-J
a
'-'s
17 (12)
a<*g(-?\
s(z)
-\T
17-.aa
lV<;/r>
-L^fiirl
where s represents the age at which the old-age pension is granted.
To allow for cases where the benefit to be valued covers education
allowances added to invalidity pension as well as those added to old-age
pensions, the differences N . , -— N",\ must be substituted for the commutation functions N .2) . In this way is avoided the duplicate
reckoning of the present values of education allowances which are
payable to insured persons who become invalid after having passed the
age s at which the old-age pension is granted.
Dowries
In the investigations preparatory to the 1928 Act, the present value
of dowries is calculated by means of the following commutation functions
nav
7aa
y+i , .
r
A
,.av
v
rav
where £y and V- represents (for females) the probabilities of being
married and the marriage rates already mentioned in Chapter 11.
The investigations preparatory to the 1934 Act [6] are based on the
table reproduced above (table VI) which was constructed by the
Central Institution from the data regarding cessations of insurance and
matrimonial status derived from persons insured during the years
1926-1930.
The following new commutation functions have been constructed
with the help of the columns vl and /" a s which appear in this table:
p-.aa
pjaa
y
D„ -= ly v ;
p^av
7 aa(s)
C„ = ly
P*/ras
y+i
v
¡xy ;
"S^ Pnao
My = ^
fc=o
1
See p. 95.
ty+k
.
143
CZECHO-SLOVAKIA
From these the present value of the right to unit dowry in respect of an
insured woman aged y is immediately obtainable by the formula:
*-* it
TOTAL PRESENT VALUE OF BENEFITS AND TOTAL ANNUAL
EMERGING COST
In the course of the investigations preparatory to the 1924 Act, the
present value of all benefits in respect of the initial insured population
and also of future entrants were calculated separately for basic amounts
and for additions depending upon duration of insurance. The totals
obtained
appear in the liabilities of the preliminary valuation reproduced
below 1.
The actuarial balance-sheet as at 1 January 1930 2 necessitated the
calculation of the present value of
(1) benefits in the course of payment;
(2) the various benefits in the course of being acquired (in respect
of the present insured population) ;
(3) the various benefits in respect of future entrants into insurance.
The following figures give the estimate, for the principal categories, of
the total annual emerging cost of benefits 3 :
TABLE X X I I I .
ANNUAL EMERGING COST O F
BENEFITS
(Estimates in the preparatory investigations, in thousands of crowns)
Number of years since
coming into operation
of the scheme
5
6
7
8
9
10
11
12
13
14
15
16 . . . .
17 . . . .
18
19
20
1
2
3
.
.
Invalidity
pensions
Old-age
pensions
Widows'
and orphans'
pensions and
educational
allowances
6,802
20,692
34,653
49,035
63,936
79,368
95,318
111,769
128,704
145,548
163,292
182,082
200,861
220,125
239,904
260,257
2,390
7,996
14,963
23,156
32,424
42,550
53,248
64,279
75,408
86,446
97,299
107,881
118,116
127,939
137,305
146,174
938
2,960
6,817
13,126
18,360
23,448
28,620
34,232
39,777
45,848 .
51,437
57,356
63,270
69,339
75,570
81,980
See Chapter III, p. 153.
See Chapter III, p. 156.
A second estimate produced slightly different results.
No. 3, p. 163.
Total
10,130
31,648
56,433
85,317
114,720
145,366
177,186
210,280
243,889
277,842
312,028
347,319
382,247
417,403
452,779
488,411
See Bibliography
144
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
EXPERIENCE
The most important results of the operation of the scheme concerning
payments made in respect of benefits are
(1) the total amount paid each year for each benefit;
(2) the average pension paid each year (for each benefit).
These two series of results appear in table XXIV below, which
demonstrates the effect of the increase in benefits which came into force
on 1 July 1934.
TABLE XXIV (a).
AMOUNT OF B E N E F I T S PAID
EACH YEAR
(In thousands of crowns)
Widows'
Invalidity Old-age or wid- Orphans'
Total
pensions pensions owers' pensions pensions
pensions
~Yp*r
1926
1927
1928
1929 *
1930
1931
1932
1933
1934
1935
1936
1937
471
6,278
23,561
54,348
91,968
148,320
212,166
237,825
248,768
2
16
625
5,835
14,663
29,296
47,062
58,780
68,883
416
1,917
3,989
6,261
8,982
13,382
18,837
22,746
26,416
504
2,171
4,153
6,177
8,550
11,634
15,165
18,135
20,096
1,393
10,381
32,328
72,622
124,163
202,632
293,231
337,486
364,163
Lump
sum
payments*
on
death
463
3,551
4,398
4,042
5,037
5,150
5,551
6,212
6,499
7,444
8,222
8,769
Dowries
—
—
Grand
total
10,742
19,252
21,657
22,128
21,058
20,448
20,243
21,427
23,339
463
3,551
4,398
16,178
34,671
59,135
100,301
151,434
229,578
320,918
367,135
396,271
i On account of t h e qualifying period t h e only p a y m e n t s made before 1929 were the
lump sum p a y m e n t s on d e a t h .
TABLE XXIV
(h).
AVERAGE AMOUNT OF P E N S I O N PAID
EACH YEAR
(In crowns)
Year
Invalidity
pensions
Old-age
pensions
1 9 3 1 . . . '. .
1932
1933
1 9 3 4 (1st half) .
1 9 3 4 ( 2 n d half) .
1935
1936
1,276
1,305
1,326
1,343
1,649
1,661
1,660
1,297
1,317
1,335
1,791
1,817
1,838
Widows' or
widowers'
pensions
632
643
655
668
834
838 •
843
Orphans'
pensions
495
497
503
507
568
573
573
145
CZECHOSLOVAKIA
The supplementary pensions instituted by the 1934 Act for the
benefit of insured persons who were born before 1 January 1899 have
given rise to the following total payments: about 22 million crowns
during the second quarter, 1934; about 55 million crowns during the
year 1935; about 68 million crowns during the year 1936; about 81 million crowns during the year 1937.
Jubilee Fund
On the occasion of the tenth anniversary of the Czecho-Slovak Republic, a special fund, called the Jubilee Fund, was created by an initial
grant of one million crowns. It was increased by two millions in 1930
and by one million in 1935 on the occasion of President Masaryk's 80th
and 85th birthdays. This fund is used to provide help to insured persons
who become invalid or are without resource or medical assistance and
who do not fulfil the qualifying conditions for receipt of benefit in the
scheme of insurance against invalidity, old age and death. The following
sums have been distributed:
Voar
Thousands
of crowns
ïedT
1929
1930
1931
1932
1933
1934
1935
1936
1937
198
424
323
325
365
343
750
420
393
§ 4. — Other Expenditure
M E D I C A L ASSISTANCE
The Act passed in 1934 provides that:
(1) The Centra] Institution may at any time, at its own expense,
grant an insured person curative treatment for the purpose of
averting or postponing an impending invalidity (this treatment
may be granted to a widow only if she is sick) ;
(2) Within the limits of the sums allocated to curative treatment and
in accordance with a plan which shall be approved each year by
the Ministry of Social Welfare in agreement with the Ministry of
Public Health and Physical Culture, the Central Institution may
carry out and promote general or special measures and schemes
for the prevention of premature invalidity among insured persons
and their families, the combating of social diseases (tuberculosis,
nervous disorders, venereal disease, alcoholism, cancer, etc.) or
the raising of the general level of health among insured persons
and their families.
The technical investigations undertaken preparatory to the 1924 Act
allocated 3 per cent of the contribution income to medical assistance [3].
The sums which have been actually used for the prevention and cure
of invalidity, principally in sanatoria, hospitals, thermal establishments
10
146
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
and nursing homes, amounted to the following totals, in thousands of
crowns:
Year
Cost of
medical
assistance
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
914
8,654
19,009
26,013
30,894
23,646
25,533
24,825
26,899
23,057
21,797
ADMINISTRATION EXPENSES
In the investigations preparatory to the 1924 Act, a fraction of the
contributions, fixed at 11 per cent of the total, was prescribed for covering
administration expenses [3].
The expenditure of the workers1 scheme of insurance against invalidity,
old age and death under the heading of administration includes both the
cost of maintaining the Central Institution and also the repayment to
sickness insurance institutions of the expenditure in respect of local
financial operations entrusted to them. The repayments to sickness
insurance institutions and the total expenditure amounted to the
following figures, in millions of crowns:
Year
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
.
.
Repayments to
sickness insurance
institutions
Total
administration
expenses
10.9
25.0
24.7
30.9
30.4
29.2
28.4
28.-0
27.5
27.2
27.6
28.7
12.2
30.3
33.5
42.3
58.4
50.3
50.6
51.4
53.3
54.5
54.5
56.0
The figures appearing in table XXVI below show the charge in respect
of medical assistance and administration expenses, according to calculations made in the course of the investigations preparatory to the 1924
Act.
For the actuarial balance-sheet as at 1 January 1930 the emerging
cost has been estimated for medical assistance and administration
expenses together, in accordance with data collected by the Central
Institution from 1926 to 1933, at an annual total commencing at 85 millions and increasing annually by one per cent, of this initial figure up
to a maximum reached after twenty-five years.
CZECHOSLOVAKIA
147
Since these estimates were in excess of the a m o u n t s actually realised,
it was decided that, for the balance-sheet as at 1 J a n u a r y 1935, t h e same
mitial total and the same rate of increase should b e maintained b u t t h a t
t h é initial year should be changed from 1930 to 1935.
TABLE OF SYMBOLS INTRODUCED IN CHAPTER II
(0
Limiting age.
i
Annual interest on a monetary unit.
1
Discounting factor
1+ i
Proportion of old-age pensions which begin to be payable at
age k.
«ft
Proportion of old-age pensions not in payment at the beginning
of the kth year of age.
Present value of a unit contribution payable in respect of an
insured person aged x so long as he remains healthy and not
later than age 65.
aa
a
*,65-."c|
= Premium reserves calculated by the normal method.
<w 5
= Premium reserves reduced by Küttner's method.
= Present value of a unit contribution payable in respect of an
insured person aged x so long as he remains healthy and
until the commencement of the payment of the old-age
pension.
aa
=
66-cc|3-JC
&i2> &S2
, aaipi
<65
aa
e5-x| sc
a
aaipi
=
Present value of the right to unit old-age pension, payable
from age 65, acquired by an insured person aged x.
Adjusting coefficient to allow for monthly or weekly payments.
Present value of the right to unit old-age pension, with postponable commencing age, acquired by an insured person
aged x.
Present value to an insured person aged x of the right to
additions of old-age pension, on the assumption that these
additions increase the amount of pension by a unit for each
completed contribution year before age 65.
Present value to an insured person aged x of the right to additions of old-age pension, on the assumption that these additions increase the amount of pension by a unit for each
completed year before the date of commencement of payment of pension.
Present value of a unit invalidity pension when invalidity
commenced at age x and has a duration of k years.
i(tt>
<p|aM
Present value of a unit invalidity pension at age x of entry
into pension, taking into account suspension of the right
to invalidity pension for periods covered by payments from
the sickness insurance scheme (monthly payments).
148
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
ai
***
ai
M•**
<6s
at
1+1 a x
'
i+1
'
< .
ai<p>
x
-p
v
a
d-xiv)
|i7-z a z
it***<»
i7 a
°-x{z)
17
a
ai
*<z>
"aaa
s-x\ x(z)
p
Aav
v
— Present value of a unit invalidity pension in t h e course of
being acquired, in respect of an insured person aged x .
= p r e s e n t value of a unit invalidity pension i n - t h e course of
being acquired, in respect of an insured person aged x ,
taking into account a waiting period of t years.
= present value to a n insured person aged x of the right to additions of invalidity pension, on t h e assumption t h a t these
additions increase the a m o u n t of pension b y a unit for each
completed contribution year from t h e end of t h e waiting
period until age 65.
= Present value to a n insured person aged x of the right to additions of invalidity pension, on t h e assumption t h a t these
additions increase the amount of pension b y a unit for each
completed contribution year from t h e end of t h e waiting
period until t h e date of commencement of p a y m e n t of oldage pension.
= Present value of t h e right to a unit pension or to a lump sum
on death in respect of the .wife of a n insured m a n who
becomes a widow a t age y .
— Present value of t h e right t o a unit widow's pension or t o a
lump sum on death acquired b y a n insured m a n aged x .
=
Present value of a unit pension paid to an orphan aged z.
= Present value oí the right to unit orphans' pensions on the
death of a n insured man aged x .
— Present value of t h e right t o unit orphans' pensions acquired
b y an insured m a n aged x .
= Present value of t h e right to a unit education allowance, added
to an invalidity pension, acquired by an insured m a n aged x .
=
=
P r e s e n t value of t h e right to a unit education allowance, added
t o an old-age pension, acquired b y an insured man aged x
(the old-age pension being payable as from age s).
Present value of t h e right to a unit dowry on marriage in
respect of an insured woman aged y .
CHAPTER III
FINANCIAL SYSTEM
The financial system which, after thorough technical research, was
adopted as the basis for the scheme of workers' insurance against
invalidity, old age and death, satisfies certain essential requirements
which must first be summarised.
Financial equilibrium is secured between contributions on the
one hand and benefits on the other. The individual State subsidies do
not, strictly speaking, enter into the financial mechanism and entail
only simple accounting operations \
The rates of contribution are based on general average premiums
(the calculation of which will be analysed in the first section of this
chapter). In each wage class a uniform rate of contribution is fixed,
applicable to all present and future insured persons.
Future entrants into insurance will bear a part of the burden in respect
of the initial population. However, the ratio of contributions to benefits
is so arranged that thé cost to future entrants is not excessive and cannot
exceed that required to purchase the same benefit rights from private
assurance companies.
The accumulation of reserves is limited to those required to safeguard
the actuarial equilibrium of the system.
A rate of interest of 4 per cent, was used as the basis for the calculations made in the investigations preparatory to the 1924 Act; the basic
rate of interest was increased to 24% per cent, by the 1928 Act when itwas found that the interest yield was appreciably in excess of the latter
rate.
§ 1. — Calculation of the General Average Premiums
In § 3 of the preceding chapter prominence was given to certain
expressions which represent the probable present values of unit contributions or of unit payments for the various classes of benefit and which
constitute the essential theoretical bases on which depends the calculation of the present value of the total liabilities and assets of the
insurance scheme.
1
A valuation has, however, been made of the annual charge falling on the
State in respect of the payment of individual subsidies: see Chapter II, § 2,
pp.2 125-127.
See later, Chapter IV, § 2, p. 163.
150
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
If a denotes any one of these expressions, the present value to which
it leads may be calculated as follows:
(1) in respect of the initial male population
(2) in respect of the initial female population
^ 1
y
^'y
a
y ")
(3) in respect of future male new entrants
3C=15
where c represents an annual coefficient of increase of the population l, independent of age, which is taken to be equal to 1.01 a .
This formula may be written
19
by letting
k = v1'* clh + v3h c3U +
...
that is to say by taking
k = 34.16301 for a rate of interest oí 4 per cent.,
k = 29.35288 for a rate of interest of 4 % per cent.;
(4) in respect of future female new entrants
k2
Dl
l a. •
y=i5
From the comparison of the liabilities and the assets of the scheme
are immediately obtained average premiums in respect of the various
classes of insured persons and the various types of benefit.
These average premiums were at first obtained by means of the
formulae reproduced in Chapter II, which are based on the assumption
that throughout his career each insured person receives a constant
i
l
2
See Chapter I, § 2, p. 106.
The formulae and hypotheses adopted for the first calculations of general
average premiums during the preparatory work have here been followed.
For instance, it is supposed that the contingents becoming insurable each
year include persons of all ages from 15 to 19. In the subsequent calculations
of general average premiums, a number of data were modified, but the principle
has remained the same.
151
CZECHO-SLOVAKIA
wage. They were recalculated on the assumption that the wage increases regularly each year by 10 per cent, of its initial value between
the ages of 15 and 25 and then remains constant at double its initial
figure. Since the increase of wages is of consequence only in so far as it
entails transfer from one wage class to another, there was calculated,
in each case, a weighted average of the premium P corresponding to the
first assumption and the premium P is) corresponding to the second
assumption. The weighting coefficients were determined in the investigations preparatory to the 1924 Act at first on the basis of statistics
of wages at 1 January 1923:
Wage
class
Weighted average
premium
A
0.6 P™ + 0.4 PA
B . . .
0.4 P * + 0.6 P B
C
0.2 P™ + 0.8 P c
D
Px,
and then on the basis of statistics of wages at 1 January 1924:
Wage
class
Weighted average
premium
A
0.4 P f + 0.6 P A
B
0.26 P * + 0.73 P B
C
•
D
0.13 PÍf + 0.86 P„
c
PD
On the basis of the average annual numbers of contribution weeks,
which have been indicated above, namely:
In class A
., >. B
„ „ G
• „
„
D
42 weeks
44 „
46 „
•
48
„
the investigations preparatory to the 1924 Act calculated, for each type
of benefit, average premiums relating respectively to:
(1) Males, females and both sexes combined;
(2) The initial population, future entrants and all contributors.
Below are reproduced the average premiums obtained, in each wage
class for all benefits combined and for both sexes, from two series of
calculations based respectively on wages statistics as at 1 January 1923,
and as at 1 January 1924.
152
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Wage class
Average annual
premium for the
initial population
Average annual
premium (or
future entrants
Average annual
premium for
all contributors
(general average
premium)
First series of average premiums [2]
(based on wages statistics as at 1 January 1923)
A
B
G
D
226.77
279.48
335.91
410.34
154.29
194.34
236.11
290.38
176.96
220.91
267.09
327.41
Second series of average premiums [3]
(based on wages statistics as at 1 January 1924)
A
B
C
D
219.38
270.60
325.56
394.82
146.46
185.78
227.37
279.16
169.15
212.12
257.79
314.86
§ 2. — Preliminary Valuation and Table of Annual Estimates
The first series of average premiums relating to all contributors
(general average premiums) was used as the basis for the rates of contributions in the first technical valuations which preceded the 1924 Act.
The rates assumed * in these valuations corresponded t o annua] contributions—reproduced below—which were in excess of the theoretical
general average premiums:
Wage class
A
B
C
D
Annual contribution
corresponding to the rates
assumed in the first
investigations preparatory
to the 1924 Act
184.80 crowns
255.20
331.20
„ •
432.00
The difference between these annual contributions and the general
average premiums represented a margin which was to be used t o cover
administration expenses and t h e cost of medical assistance and finally
t o maintain a special guarantee fund.
The investigations preparatory to the 1924 Act concluded with the
construction, on t h e bases just described, of a " preliminary valuationsheet " demonstrating the solvency of the system at the time of its
coming into force. This is reproduced below:
1
Which have been referred to above: Chapter II, § 1, p. 116.
153
CZECHO-SLOVAKIA
TABLE XXV.
PRELIMINARY VALUATION SHEET
(at 4 per cent, interest)
(In millions of crowns)
ASSETS
LIABILITIES
Contributions :
Wage class A
„ B
„ C
„ D
13,380
8,198
5,599
15,821
Basic amounts
Additions:
Wage class
„
„
„
„
7,179
A.
B.
C.
D.
.
.
.
.
9,877
5,626
3,631
9,973
-29,107
Administration expenses, medical assistance and grant
to guarantee fund:
Wage class A . . 629
„ B . . 1,150
„
„ C . . 1,103
„ D . . 3,830
6,712
Total
Total
. 42,998
42,998
It has already been seen that the rates of contribution which came
into operation on 1 July 1926 are 1.8 per cent, less than those which
were at first taken into consideration. This reduction is due to the fact
that during the first ten years the insurance scheme will benefit by
reason of the interest yield being in excess of the basic rate of interest.
It was assumed that the interest yield would be 5 per cent, during the
first five years and 4% per cent, during the next five years. The
reduction in the rates of contribution corresponding to this assumption
was calculated in such a way that the total amount of the reserves at the
end of each year would not be increased. This condition enables a
direct calculation to be made of the amount P n of the contribution
income to be substituted for the amount P n calculated on the basis of
interest at 4 per cent. The proportionate reduction of the rates of
contribution is then given by the formula [3]
> P
p'
1.05
5
+ 1.05* 2
fa'
p
p'
1.045
p
2 "
tZ 1-05"
+ 1.05e Z*
1.045"
The excess of the rates of contributions actually put into operation
over the theoretical average premiums still represented a margin. This
margin, estimated to be 15.3 per cent, of the total contributions, was
apportioned as follows [3]:
11 per cent, for administration expenses;
3 per cent, for medical assistance;
1.3 per cent, for the guarantee fund.
154
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
On the bases adopted for the second series of calculations made in
the course of the preliminary investigations there was drawn up a table
of annual estimates—reproduced below—which shows the probable
financial development of the system:
TABLE
XXVI.
— TABLE OF A N N U A L ESTIMATES—-PROBABLE
OF INCOME AND O U T G O — G R O W T H OF F U N D S
PROGRESS
(In thousands of crowns)
Income
Year of
operation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total
accumulated
fund at
beginning
of year
Contributions
482.95
989.96
1,527.50
2,089.49
2,669.61
3,235.54
3,797.39
4,350.13
4,895.40
5,433.89
5,949.85
6,467.32
6,987.29
7,510.26
8,037.98
8,566.75
9,097.18
9,629.92
10,165.57
10,704.73
11,248.07
11,794.81
12,345.27
12,899.40
13,457.00
14,019.76
14,587.31
15,158.90
15,733.48
577.00
601.04
626.05
650.30
674.27
678.81
683.14
687.26
691.18
694.93
717.75
739.42
761.22
783.12
805.10
827.15
849.28
871.50
893.79
916.14
938.59
960.97
983.57
1,006.11
1,028.65
1,051.02
1,073.51
1,095.94
1,118.29
1,140.56
Outgo
Total
Adminis- accumulated
tration
at
expenses fund
end of
Interest Benefits Transfer
and
values medical
year
assistance
12.41
37.07
62.96
90.36
118.97
133.27
158.82
184.18
209.13
233.74
229.70
250.71
271.79
292.96
314.26
335.75
357.28
378.88
400.57
422.38
443.33
466.45
488.71
511.12
533.67
556.36
579.25
602.34
625.59
648.96
25.68
46.95
63.82
81.53
6.10
97.67
21.05
40.65 110.47
64.42 120.05
92.16 130.32
119.97 138.30
148.80 144.09
178.62 152.38
209.54 159.60
240.78 165.69
272.75 170.72
304.27 174.66
336.12 182.21
368.04 189.19
400.01 195.62
432.05 201.53
464.22 206.88
496.47 211.71
530.14 216.00
564.36 219.76
599.27 222.97
635.08 225.63
669.76 227.72
705.65 229.27
743.02 230.24
782.10 230.64
823.18 233.48
80.78
84.15
87.65
91.04
94.40
95.03
95.64
96.22
96.77
97.29
100.49
103.52
106.57
109.64
112.71
115.80
118.90
122.01
125.13
128.26
131.40
134.54
137.70
140.86
144.01
147.14
150.29
153.43
156.56
159.68
482.95
989.96
1,527.50
2,089.49
2,669.61
3,235.54
3.797.39
4;350.13
4,895.40
5,433.89
5,949.85
6,467.32
6,987.29
7,510.26
8,037.98
8,566.75
9,097.18
9,629.92
10,165.57
10,704.73
11,248.07
11,794.81
1-2,345.27
12,899.40
13,457.00
14,019.76
14,587.31
15,158.90
15,733.48
16,306.66
§ 3. — Actuarial Balance-Sheets and Financial Development
of the Central Institution
The actuarial balance-sheet which the Central Institution must draw
up every five years makes use of the theoretical factors, which were
previously used for determining the general average premiums, for the
purpose of calculating the assets and liabilities of the insurance scheme.
155
CZECHO-SLOVAKIA
The actuarial balance-sheet drawn up as at 1 January 1930 introduces
a certain number of new factors of which we shall describe the most
important:
1. The distribution of the contribution days, according to age and
wage class, based on the experience of the year 1929 1. This distribution
made it possible to take account of the growth of wages with age without
having recourse, as hitherto, to the premiums P<s>. At each age the
average value of the daily contribution and the average value of the
addition corresponding to a day's contribution were calculated by the
following formulae:
PT = y [d(x> A °) • 2 - 6 + d(x>A»)
•3-6 +
+ d ( * , B ) . 5 . 1 + á ( * , C ) . 6 . 6 + á ( * , D ) . 8.4J ;
i
j[d{x,
A 0 ) . 0.60 + d{x,Ab).
+ d(x, B) . 1.15 +d(x,
0.85 +
G) . 1.40 +d(x,
D) . 1.75],
where d (x, Aa) , d (x, Ab) , d (x, B ) , d (x , C) , d (x , D)
represent the percentages of contribution weeks in respect of each
wage class.
2. The present value of the rights to supplementary benefits in the
case of insured persons born before 1 January 1899, which is calculated by means of the following formula [6J (in the case of males):
N <am,
1
3
m
)\) *^'\x
an nx •
J
i£,
1=31
+ 2 a*
or
N ,sm,
where
Ni a m ) = N : + 0.5 Kw
and
j^tsm)
2
jy.aa(i2)
+ 0.2 r c + 0.1 r e
aa
' + 0.1 (NX(Z)
represent commutation functions which cover at the same time invalidity
and old-age pensions, widows' and orphans' pensions and education
allowances. The symbol Q.x denotes the average annual amount of
the additions actually acquired during the five years 1927 to 1931. An
analogous formula is used for females.
3. The payment of a sum of 100 millions, made available by the
increase of the rate of interest from 4 per cent, to 4% per cent, for the
purpose of providing sanatoria for the treatment of insured persons
suffering from contagious diseases, in particular tuberculosis, and for
the purpose of providing maternity wards in public hospitals.
1
See above, Chapter II, § 1, p. 116.
156
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Below is reproduced the actuarial balance-sheet drawn up by the
Central Institution as at 1 January 1930, on the basis of interest at
4% per cent.:
TABLE XXVII. — ACTUARIAL-BALANCE-SHEET OF THE CENTRAL INSTITUTION
AS AT 1 JANUARY 1 9 3 0
(At rate of interest 4% per cent.)
(In millions of crowns)
LIABILITIES
ASSETS
Fund as at 31 December
1929
2,366.18
Contributions
of
existing
members . . 9,175.24
Contributions
of future entrants . . . 13,284.63
22,459.87
Present value of future
profits due to over-estimation of risks . . .
Present value of future
profits due to excess
interest yield of the
accumulated funds over
the valuation rate . .
130
220
V
\
\
\
\
\
\
\
\
50.00
13,049.54
Benefits payable in respect of future entrants:
Basic
amounts . . 2,379.44
Additions . 6,908.61
Dowries . .
426.59
\
\
\
\
\
\
\
\
9,714.64
Transfers to other institutions . . .
2.66
Administration expenses
' and medical assistance 2,250.21
Special grants for prevention and cure of
invalidity . .
100.00
Surplus . . . .
9.00
\
\
y.\
\
\
\
\
Total
Benefits in course of payment . . . .
Benefits payable in the
future in respect of existing insured
persons:
Basic
amounts . . 4,021.11
Additions in
respect of
past contributions 1,207.86
Additions in
respect of
future contributions 6,499.16
Dowries . .
186.85
Supplementary benefits in respect of insured persons born
before
1
J anuary
1899 . . . 1,134.56
25,176.05
Total .
25,176.05
157
CZECHOSLOVAKIA
The actual financial development of the Central Institution is shown
in the following table which, shows the summarised results of the
application of the scheme:
TABLE XXVIII.
FINANCIAL PROGRESS OF THE
CENTRAL
INSTITUTION
(Aggregate results of the operation of the scheme—in thousands
of crowns)
Year
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
. . . .
. . . .
Contributions
and
subsidies
Interest on
accumulated
funds
Expenditure
Fund as at
31 December
in tùe year
335,093
675,887
731,183
644,343
623,720
577,327
502,578
436,372
422,108
406,837
481,413
610,197
917
26,872
63,369
105,664
143,123
177,536
206,864
222,940
246,764
270,405
268,284
288,096
15,505
36,623
90,054
74,970
133,245
129,417
146,270
186,040
244,781
327,965
350,574
374,201
320,506
986,641
1,691,140
2,366,177
2,999,775
3,603,873
4,154,838
4,586,874
4,988,149
5,379,689
5,778,812
6,302,904
1
CHAPTER IV
FINANCIAL ADMINISTRATION
§ 1. — Investment of Funds.
Statutory Provisions and Regulations
From the point of view of finance the scheme of insurance against
invalidity, old age and death is administered solely by the Central
Insurance Institution; the sickness insurance institutions which assume
the local administration of the insurance against invalidity, old age and
death are called upon to carry out only accounting operations.
The available funds are invested by the Central Insurance Institution,
but in doing so it must conform with certain statutory provisions and
regulations. The essential provisions governing the investment of the
funds are reproduced below.
PRESCRIBED CLASSES OF SECURITIES
A part of the funds available for investment in long-term securities,
equal to at least 20 per cent, of the total, must be invested in Government
securities and another part, fixed at 10 per cent, of the same to bai, must
be invested in other securities named by the Minister of Social Welfare
in agreement with the Minister of Finance. The Government may reduce
the limits mentioned above and alter the relationship between the two
fractions.
Since 1934 the Central Institution must each year deposit with the
Czecho-Slovak Rediscount and Mortgage Institution 1 10 per cent, of
the growth in its funds available for long-term investment, provided
that this deposit does not amount to 5 per cent, of the total of these
funds; ultimately it must maintain a deposit at least equal to the amount
corresponding to the latter percentage.
1
The Rediscount and Mortgage Institution was inaugurated by the Act
of 14 March 1934, and the following functions were assigned to it:
(a) granting to banks or negotiating on their behalf rediscount credits or
advances on security;
(b) participating in the regulation of the Government security market and
in Government credit operations.
CZECHO-SLOVAKIA
159
AUTHORISED GLASSES OF SECURITIES
The following classes of securities are authorised for the investment
of the sums remaining after the prescribed investments have been made :
(a) Government securities and other Czecho-Slovak securities in
which the investment of orphans' property is authorised, or
loans on such securities;
(b) Bonds of the State, provinces, districts or communes or loans
guaranteed by these authorities;
(c) Czecho-Slovak mortgage loans specified as suitable for the
investment of trust moneys 1 ;
(d) Deposits in financial institutions which are guaranteed by the
State, province, district, or commune, either in respect of their
total liabilities or in respect of at least the deposits made by
social insurance institutions;
(e) Bonds of public bodies which are entitled to levy taxes.
OTHER STATUTORY PROVISIOÏSS
The Central Institution may invest a portion of its available funds
in mortgage loans and in productive real property in Czecho-Slovakia,
provided that they are not encumbered with charges exceeding one-third
of the ordinary value.
Authorities who are entrusted with the choice of investments must
see that they are distributed among the various provinces in the same
proportions as the insurance contributions received during the preceding
three years.
The sums which are necessary for current expenses may be deposited
with trustworthy credit institutions. If the National Bank of Czechoslovakia undertakes for currency reasons to receive deposits of public
moneys and to pay interest thereon, preference must be given to this
method of investment when the return on the capital is the same.
As an exception, and subject to the approval of the Minister of Social
Welfare, the Central Institution may invest a part of its available funds
in investments other than those which are authorised by the general
rules referred to above and ma.y in this way participate, in narticular.
in helping the provision of dwellings and in developing social schemes
exclusively or mainly for the benefit of insured persons.
The funds of the Central Institution must be invested so that their
productivity and economic yield are maintained and so that the average
return thereon is equal to the rate of interest taken as the basis of
calculation. Consequently the purchase of real property and the exceptional investments mentioned above cannot be authorised if the average
return on the total investments of the Central Institutions does not
reach the rate of interest taken as the basis of calculation. The Central
Institution is bound to lay before the Government, not later than the
end of June each year, documents showing that the interest income
from the invested funds has been sufficient during the preceding civil
year.
1
A mortgage loan is deemed to be suitable for the investment of trust
moneys when the amount of such loan does not exceed half the real value of
the mortgaged property in the case of a house and two-thirds in the case of
agricultural land.
160
ACTUARIAL T E C H N I Q U E
SELECTION
AND FINANCIAL
ORGANISATION
OF INVESTMENTS
•The selection of investments is essentially a matter which comes
within the jurisdiction of the Management Committee and the governing
body of the Central Insurance Institution. The functions and competence
of the Management Committee and of the governing body will be
examined in turn.
The Management Committee first formulated general guiding principles for the investment of its moneys, which it reserves the right to
modify. These cannot be put into operation without the approval of
the Minister of Social Welfare, given in agreement with the Minister
of Finance after consultation with the National Bank of Czecho-Slovakia.
When they have been approved, no amendment or exception may be
made without the consent of the Minister of Social Welfare, given in
agreement with the Minister of Finance. The guiding principles determine the apportionment of authority in the matter of investment of
funds among the Management Committee, the governing body and the
board of three directors, within the provisions of the Act. They also
specify the conditions under which the various investments prescribed
or authorised by the Act shall be carried out: the selection of loans
which may be made direct and of those which must be made through
the medium of public credit institutions, the guarantees to be demanded,
the methods of repayments, the length of the period of notice required,
etc.
The scheme of investments drawn up annually by the governing body
is submitted to the Management Committee for approval.
The Management Committee is also charged with the investment of
funds in real property whatever their value. However, when these
investments exceed a million crowns the approval of the Ministers of
Social Welfare and Finance is required.
When a meeting of the Management Committee is held for the purpose
of drawing up or amending the guiding principles or of adopting the
annual scheme, there are included two representatives of the Minister
of Finance and two representatives of the National Bank of Czechoslovakia. The representatives of the Minister of Finance may issue a
veto which has the effect of a bar on subsequent proceedings. The
representatives of the National Bank of Czecho-Slovakia are present in
an advisory capacity.
The. governing body draws up each year a scheme of investments and
submits it for approval to the Management Committee. This scheme
specifies the sums which will be available for investment during the
year. It fixes the maximum and minimum ratios which must be maintained during the year between the various classes of investments, in
accordance with the statutory provisions and the guiding principles. It
may contain provisions relating to investments to be made
during the year. It also includes provisions fixing a uniform rate of
interest for investments in the same category. The governing body
carries out the investments specified by the annual scheme, with the
exception of investments in real property which come within the scope
of the Management Committee; it may delegate its powers to the board
of three directors, within the limits of the annual scheme and particularly in respect of the purchase of securities quoted on the Bourse.
When the governing body is called together for the purpose of drawing
up the annual scheme or the general conditions of investment there are
included two representatives of the Minister of Finance and two repre-
c
161
CZE CHO-SLOVAK JA
sentatives of the National Bank of Czecho-Slovakia. The former are
entitled to issue a veto barring subsequent proceedings, the latter are
present only in an advisory capacity.
THE INVESTMENT OF FUNDS
The Central Institution has the free choice of the organisations which
are to carry out the specified investments.
The majority of the investments are carried out directly by the
competent department of the Central Institution. .For example, this
department gives the orders for buying or selling securities quoted on
the Stòck Exchange either to the banks or to the Rediscount and
Mortgage Institution. ,
On the other hand, certain classes of investment are carried out
indirectly through the medium of public credit institutions, in accordance
with the general guiding principles. This applies particularly to loans
granted for the improvement of land, which are carried out through
the medium of public institutions for credit on real estate. The Central
Institution grants to such institutions a long-term credit but leaves to
them the responsibility of operating it: in this way it gets rid of the
responsibility of a number of small loan operations which necessitate
local visits and continual supervision.
§ 2. — Statistics of Investments
COMPOSITION OF THE FUNDS
The detailed composition of the funds of the Central Institution at
the end of each year is shown by table XXIX (p. 80).
An examination of this table shows that an important part of the
funds of the Central Institution is employed in productive undertakings
or works of social hygiene. Below is reproduced as an example a detailed
subdivision, as at 31 December 1935, of the loans granted to provinces,
districts and communes and other loans bearing a public guarantee:
Nominal values
(in crowns)
Hospitals
122,367,000
Homes for the aged and orphans
59,045,000
Construction of canals
36,301,546
Miscellaneous
13,595,000
Total loans to works of social hygiene
Gas and electricity
Water supply
Communications
Miscellaneous
231,308,546
137,550,315
137,870,204
112,498,435
170,035,100
Total loans to productive schemes
557,954,054
Grand total of loans to communes, districts and provinces
and loans bearing a public guarantee
789,262,600
INCOME FROM INVESTMENTS
The sums received each year by the Central Institution in respect of
interest on investments are shown above in column 3 of table XXVIII.
H
TABLE XXIX. — LIST OF INVESTMENTS OF THE CENTRAL INSTITUTION AS AT 3
(in t h o u s a n d s of crowns)
Cash in hand
Bank deposits
Compulsory deposits with the
Rediscount and Mortgage
Institution
Stocks and shares:
1. Government securities .
2. Other securities . . . .
Loans on stocks and shares. .
Direct loans:
1. To the State or to State
Funds
2. To provinces
3. To districts
4. To communes
5. Under public guarantee.
6. To sickness insurance
institutions
Mortgage loans
Loans for land improvement .
indirect loans:
1. To land improvement
undertakings
. . . .
To communes
To individuals or cooperative societies for
building houses . . .
To industry and handicrafts
Housing loans
Under the Act concerning
State relief in agricultural disasters . . . .
7. Export credits
Premises and equipment
Total . . .
1927
1928
63
368,309
240
397,214
283
265,268
306
346,758
104
198,034
158
172,896
103
203,020
259,839
75,827
6,000
460,535
176,927
127,450
557,578
244,003
166,500
651,659
326,291
70,935
674,795
397,772
87,500
706,797
462,536
44,159
673,941
477,627
67,590
100,000
23,769
109,267
238,551
3,933
48,428
271,790
373,623
10,000
78,357
373,353
22,804
524,638
19,843
83,807
425,392
29,758
685,792
32,496
98,252
451,793
31,073
804,620
45,907
102,876
477,826
32,232
40,900
169,246
317,266
394,074
656,622
787,661
42,606
49,960
51,271
51,280
58,409
1929
1930
1931
1932
1933
140
19,672
2,451
55,862
7,311
84,334
4,246
94,128
4,001
105,817
4,060
115,881
3,948
1,677
21,865
64,681
109,751
138,269
155,498
170,237
22,430
29,249
79,939
104,702
144,428
65,911
197,361
49,487
11,000
13,500
8,166
25,505
21,330
57,763
24,655
21,044
17,728
28,134
9,077
9,427
23,228
8,721
778,985 1,489,367 2,102,861 2,898,196 3,353,887 3,973,307 4,328,503
163
CZECHOSLOVAKIA
RATE OF INTEREST YIELDED
The interest yield, calculated by relating the annual interest to the
average of the market prices at the beginning and end of the year,
works out at figures which are always in excess of the basic rate of
interest.
V(,„r
ear
Interest yield
Per cent
2.2
4.5
5.0
5.31
5.44
5.44
5.45
5.20
5.23
5.29
4.81
4.79
*
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
§ 3. — Accounting and Statistics. Actuarial
and Financial Control
STATUTORY
PROVISIONS
The Central Institution is subject to the supervision of the State,
exercised by the Minister of Social Welfare together with, in a certain
number of cases, the Minister of Finance. The accounting regulations
adopted by the Central Institution and the principles underlying the
actuarial balance-sheet cannot be amended without the approval of the
Minister of Social Welfare. The Minister may require all the books,
certificates, registers and documents of the Central Institution to be
laid before him or before an organisation designated by him and, speaking
more generally, he may ask for all the information necessary for the
purposes of the supervision exercised by the State.
The legislative texts stipulate that the amount of the contribution
for insurance against invalidity, old age and death may not be modified
except by an Act based on an actuarial investigation of the financial
stability of the Central Institution. There must be carried out, at the
same time as the actuarial investigation, (1) a statistical enquiry into
the progress of the elements which influence the development of the
insurance scheme (mortality, invalidity, marriage, exit, entry, fluctuations in wages, etc.); (2) a comparison with the expected progress (of
the same elements). The statistical enquiry mentioned above must be
made at least once in every five years.
STATISTICAL RETURNS
The statistics relating to the insurance against invalidity, old age and
death have been for the most part either reproduced or at least referred
to in the preceding chapters. In this chapter, therefore, all that is
164
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
needed is to give some information about the documents which the
Central Institution receives from the sickness insurance institutions and
about the processes by which they are analysed.
Monthly Schedules
The sickness insurance institutions have a register in which is shown
the daily number of insured members. Each month they enter the
average of these numbers on schedules which they send to the
Central Institution.
Annual Record Folios
Other documents put at the disposal of the Central Institution are
the " annual record folios " in which the sickness insurance institutions
enter each year for each insured member: the record of the contributions
paid in the various classes, his position regarding assurance on 30 June
and 31 December, and eventually the benefits paid.
The class of employment and the wage class to which the insured
member belonged on 30 June, and 31 December, and the annual
number of contribution days in the scheme of insurance against invalidity, old age and death, are repeated on a counterfoil which is detached
on arrival at the Central Institution. All the individual counterfoils are
aggregated by the statistical department of the Central Institution and
supply the data on which is drawn up each year a complete and detailed
statement of the insured population.
The remainder of the record folios is placed in an individual file with
all the papers required in proving title to benefit.
Registration Cards
The identity book which, since 1930, is given to each new entrant,
includes a card bearing the name and date of birth of the holder, which
is returned to the Central Institution for the purpose of obtaining
statistics of new entrants. On the identity book is also entered a register
number which is definitely attached to the holder whatever his future
position may turn out to be in regard to the insurance scheme.
Statistics of Benefit Payments
The Central Institution compiles detailed statistics of payments from
the return of the payments which it makes itself and from that of the
payments made by the sickness insurance institutions. The essential
results may be divided into two groups which are distinguished one from
the other by the assumed date of origin of the payment: in the one
group [12] the date of receipt of the first payment is taken and in the
other [11] the date of the occurrence of the event insured against.
Sample Statistics compiled for Actuarial Purposes
A sample investigation, covering about 50,000 healthy insured lives,
was made of data supplied by special cards, called " valuation cards ",
on which are entered in particular the name of the insured person, his
date of birth, the number of contributing days in each class during each
year, and the registered number of the sickness fund (or funds) in which
the worker has been insured.
CZECHO-SLOVAKIA
165
PUBLICATION OF STATISTICS
The Central Institution publishes two series of statistics. The first
[10], which appears under the heading of " Statistics of invalidity and oldage insurance and of the sickness of workers " *, deals particularly with:
(1)
(2)
(3)
(4)
The insured population;
The contributing days;
The rates of sickness ;
The benefit payments of the insurance scheme against invalidity,
old age and death.
The second series, which is entitled " Statistics of sickness insurance "
[11], deals principally with:
(1) The statistics peculiar to sickness insurance;
(2) The financial operations of the sickness insurance institutions and
in particular those which are effected with the Central Institution.
The majority of this statistical information appears, as and when it is
prepared, in the monthly Review of the Central Institution [12].
BIBLIOGRAPHY
. (1) Scitáni Lidu v Republice Ceskoslovenské ze dne 15. Unora 1921. (General
census of the Czechoslovak Republic as at 15 February 1921.) Knihkupectvi Bursik & Kohout. Prague, 1927.
(2) Motivenbericht zur Regierungsvorlage (Druck Nr. 4186) betreffend die
Versicherung der Arbeitnehmer für den Fall der Krankheit, der Invalidität
und des Alters. (Translation of Czech original; issued in 1924 by the
" Reichsverband deutscher Krankenkassen " and printed by the Druckund Verlagsanstalt, Teplitz-Schönau.)
(3) Bericht des Sozialpolitischen Ausschusses und des Budgetausschusses über
die Regierungsvorlage des Gesetzes (Druck Nr. 4186) betreffend die Versicherung der Arbeitnehmer für den Fall der Krankheit, der Invalidität
und des Alters. (From a Czech original to be found in Parliamentary
Document No. 4795, first legislative period, 9th session.)
(4) Regierungsverordnung vom 29. November 1928 betreffend die Überiveisungsbeträge und die Berechnungsgrundlagen der Zentral-Sozialversicherungsanstalt. Sammlung der Gesetze und Verordnungen des Cechoslovakischen Staates 1928 Nr. 195. (In Czech and German.)
(5)
Act No. 184 of 8 November 1928.
INTERNATIONAL LABOUR OFFICE,
Legislative Series, 1928, Cz. 2 (in English, French and German).
(6) Vládni návrh (Bill with explanatory memorandum): Parliamentary
document No. 2690, third legislative period, 10th session.
1
The last volume published, relating to the years 1933-1934, is limited to
statistics of the invalidity and old-age insurance.
166
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
(7) Notification of the Minister of Social Welfare to consolidate and promulgate the complete text of the Act concerning the insurance of employees against sickness, invalidity and old age. Dated 25 July 1934.
INTERNATIONAL
(8)
¡9)
(10)
(11)
(12)
(13)
LABOUR OFFICE,
Legislative
Series, 1934, Cz. 4 (in
English, French and German).
L'Institution centrale d'assurances sociales 1926-1931. Issued by the
Central Social Insurance Institute, Prague (in Czech, French and
German).
Zentral-Sozialversicherungsanstalt,
1926-1936. Issued in 1936 by the
Central Social Insurance Institute (Prague, in Czech and German).
Statistique d'assurance-invalidité et vieillesse et statistique de la morbidité
des ouvriers: 1927-28, 1929-30, 1931-32. Statistique d'assurance-invalidité et vieillesse des ouvriers : 1933-34. Issued by the Central Social
Insurance Institution (preface and tables in Czech, summary of preface
and translation of table headings in French and German).
Statistique de l'assurance-maladie. Issued by the Central Social Insurance
Institution for the years 1926,1927,1928,1929,1930,1931,1932,1933-34.
(Preface and tables in Czech, summary of preface and translation of
table headings in French and German.)
Mitteilungen der Zentral-Sozialversicherungsanstalt.
Issued by the Central
Social Insurance Institution (in Czech and German on the 15th |of each
month).
Regierungsverordnung vom 18. Februar 1937 betreffend die Überweisungsbeträge und die Berechnungsgrundlagen der Zentral-Sozialversicherungsanstalt. Sammlung der Gesetze und Verordnungen des Cechoslovakischen Staates, 1937, Nr. 23 (in Czech and German).
FRANGE
General Scheme of Social Insurance
CONTENTS
Page
INTRODUCTION
170
CHAPTER I : Demographic Estimates, Bases and Experience
173
1. Biometrie Tables
Mortality Tables
Invalidity Tables
Sickness Tables
Tables relating to Composition of Family
2. Population of Insured Persons and Contributors
Estimates of the Initial Insured Population
Experience
3. Annual Number of Beneficiaries
Invalidity Pensions
Old-Age Pensions
173
173
173
176
176
17.7
179
180
181
181
183
CHAPTER I I : Financial Estimates, Bases and Experience
1. Contributions of Insured Persons and Employers
Method of Fixing and Scales of Contributions
Estimates Relating to Insured Wages and Contribution Yield
Experience as regards Insured Wages and Contributions Collected
2. State Aid
Fixed Subsidy by the State
Wants added to Contributions of Agricultural Insured Persons
Other State Contributions
3. Sundry Resources
4. Invalidity Benefits
Invalidity Pensions
Medical Care of Invalids
5. Old-Age Pensions
1930 Act
Decrees of October 1935
Decree of 15 June 1938
.' .
Estimates made in the Course of Preparatory Investigations
186
186
186
190
191
193
193
194
195
196
196
196
200
201
201
201
202
202
6. Payments on Death
1930 Act
Decrees of October 1935
Decree of 14 June 1938
Decree of 15 June 1938
Estimates made in the Course of Preparatory Investigations
Experience
204
204
204
205
205"
205
206
168
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Page
CHAPTER II : Financial Estimates, Bases and Experience (continued)
7. Family Maintenance Expenses
207
1930 Act
207
Decrees of October 1935
207
Decree of 14 June 1938
207
Estimates made in the Course of Preparatory Investigations 208
Experience
208
8. Special Insurance of Wives of Insured Men
209
1930 Act
209
Decree of 28 October 1935
209
Estimates made in the Course of Preparatory Investigations 210
9. Maintenance of Insurance Rights of Persons suffering from
Sickness, Industrial Accident or Unemployment
210
1930 Act
210
Decree of 28 October 1935
211
Estimates made in the Course of Preparatory Investigations 211
Experience
212
10. Administration Expenses
212
1930 Act
212
Decrees of October 1935
213
Estimates made in the Course of Preparatory Investigations 214
Experience
' 214
CHAPTER I I I : Financial System
1. Essential Features of the Financial System
Insurance for Commerce and Industry
Agricultural Insurance
2. Apportionment of the Total Contribution
According to the Preparatory Investigations
Since the Coming into Force of the 1930 Act
3. Financial Equilibrium of Invalidity Insurance
Introduction
Preparatory Investigations
Scheme for Commerce and Industry
Agricultural Scheme
Estimate of the Cost of Invalidity Pensions
4. Financial Equilibrium of Old-Age Insurance
Constitution of Old-Age Pensions
Guarantee of the Legal Minima
5. Financial Equilibrium of Death Insurance
Scheme for Commerce and Industry .
Agricultural Scheme
6. Financial Equilibrium of Central Institutions
The " Federations "
General Guarantee Fund
216
, .
CHAPTER I V : Financial Administration
1. Investment of Funds: Statutory Provisions and Regulations .
Method of Investment
Nature of the Investments Authorised or Prescribed
. .
Rates of Interest of Investments
2. Statistics of Investments
Accumulation Funds
The General Guarantee Fund
Joint Works Fund
Rate of Interest Yielded
216
21&
217
218
218
219
222
222
223
224
226
227
227
227
232
233
233
234
234
235
237
248
248
248
248
253
255
255
259
259
260
169
FRANCE
Page
CHAPTER IV: Financial Administration (continued)
3. Accounting, Statistics and Financial Control
Rules for Accounting of All the Funds and Federations . .
Rules for Accounting of the Invalidity, Old-Age and Death
Insurance Funds
•
Rules for Accounting of Regional Federations
Rules for Accounting of the General Guarantee Fund . . .
Rules Relating to Statistics
Fundamental Provisions dealing with the Financial Control
of Social Insurance Funds and their Federations . . . .
260
260
261
264
265
265
267
BIBLIOGRAPHY
268
I.
II.
III.
IV.
268
268
269
269
Parliamentary Documents
Legislative Texts
Administrative Documents
Studies
,
'.
INDEX OF TABLES
I.
II.
III.
IV.
V.
VI.
VII.
Life Table P.M.F. 1931
174
Table of Cessation of Invalidity Pensions
176
Family Composition
177
Estimated Initial Population of Insured Persons
180
Estimated Initial Population of Insured Persons . . . . . . .
180
Distribution by Age of Contributors : Experience
181
Observed Numbers of Insured Persons Entering on Invalidity
(Insurance for Commerce and Industry)
182
VIII. Cessation of Invalidity
183
IX, Observed Numbers of Insured Persons Entering on Invalidity
(Insurance for Agriculture)
184
X. Distribution of Contributors by Age Group and Wage Class .
192
XI. Average Daily Wage
192
XII. Apportionment of Total Contribution among Invalidity, OldAge and Death Risks: Preparatory Investigations . . . .
219
XIII. Life Annuities deferred to Age 60 Produced by a Single
Payment of 1 Franc
230
XIV. Receipts of the Augmentation and Joint Business Fund . . .
240
XV. Expenditure of the Augmentation and Joint Business Fund . . 241
XVI. Receipts of the Agricultural Relief Fund
243
XVII. General Summary of Receipts and Expenditure of the General
Guarantee Fund
244
XVIII. Augmentation Fund Receipts and Expenditure for 1936 . .
246
XIX. Investments Made on Behalf of the Accumulation Funds but
Selected by Them
255
;
XX. Investments Selected and Made by the Deposit and Trust
Fund on Behalf of the Accumulation Funds
257
XXI. Investments Made by the National Old-Age Pension Fund .
258
XXII. Investments of General Guarantee Fund at 31 December 1936
259
INTRODUCTION
Without going back to the distant origin of compulsory insurance in
France, it may be recalled that a first general scheme of compulsory
social insurance was established by the Workers' and Peasants' Pensions
Act of 5 April 1910. This Act covered employed persons of both sexes,
subject only to an annual remuneration limit (fixed originally at
3,000 francs), whether they belonged to industry, commerce, the liberal
professions or agriculture, and even included domestic servants and
workers employed by the State, the departments and communes, who
were not subject to the scheme of civil and military pensions. The
sources of the funds consisted of payments by the insured persons,
contributions from their employers and subsidies from the State. The
insured persons' contributions, equal to those of the employers, were
fixed at uniform rates, representing on the average a small percentage
of wages, for men, women and minors under the age of 18 respectively.
The benefits guaranteed by the Act included:
(1) an old-age pension, the pensionable age being originally fixed
at 65, but reduced to 60 in 1912;
(2) in case of death before the attainment of pensionable age,
monthly payments for the benefit of widows and children under
16 years of age; and
(3) a pension granted prematurely in cases of total permanent
incapacity.
The State subsidies were intended to provide life annuities
increase, within the limits of certain maximum amounts, of the
and invalidity pensions corresponding to the contributions of
persons and employers.
Individual accounts were opened for insured persons, at their
in one of the following institutions:
for the
old-age
insured
option,
(1) National Old-Age Pension Fund (Caisse Nationale des Retraites
pour la Vieillesse),
(2) mutual benefit societies or federations of such societies,
(3) legally established departmental or regional pension funds,
(4) employers' pension funds,
(5) funds of security associations, in which employers accept joint
liability in the matter of pension insurance,
(6) trade union pension funds.
The financial administration was entrusted to the Deposit and Trust
Fund (Caisse des Depots et Consignations), which invested moneys
in conformity in every case with the desires of the institution concerned.
FRANCE
171
For various causes, and by reason of unfavourable circumstances,
this Act was never applied more than partially; and consequently it
lost much of its significance.
In view of the experience of the scheme of which the essential features
have just been outlined, a commission was appointed in 1920 to consider
drafting a Bill for a scheme of social insurance against sickness, invalidity and old age. At the end of the samé year this commission submitted to the Minister of Labour a draft Bill on which was based the
Bill [I] which the Government laid before the Chamber of Deputies in 1921.
This Bill was referred to various commissions and was the subject
in particular of a report [2] by the Social Insurance Commission, which
included a " statement of the financial and actuarial bases of the Bill ",
and after modification by the Chamber of Deputies it was laid before
the Senate in 1924. Among the reports of the various commissions
charged with the examination of the Bill placed before the Senate, the
reports [3, 4] of the Commission on Health, Assistance and Social
Insurance and the recommendation [5] of the .Finance Commission
are particularly interesting for the present purpose. The text adopted
by the Senate was passed without modification by the Chamber of
Deputies and became the Act of 5 April 1928 [12], after having given
rise, in particular, to a report [6] by the Social Insurance Commission
and to a recommendation [7] by the Finance Commission.
At the time of passing of the Act of 5 April 1928, the Chamber of
Deputies had asked the Government to introduce an amending Bill
with the least possible delay. In conformity with the undertakings
given, two amending Bills were submitted, and these gave rise, among
others, to two reports [8,10] by the Senatorial Commission for Assistance
and Social Insurance, to a recommendation [9] by the Senatorial Finance
Commission and to a report [11] by the Social Insurance Commission
of the Chamber of Deputies. The most important modifications concerned, on the one hand, the scheme applicable to agricultural workers,
which was sharply differentiated from that for employees in commerce
and industry, and, on the other hand, the payment of the contributions
relating to the invalidity risk, which was deferred as to one half until
1 April 1934, and as to the other half until 1 April 1940. These reports
led to the Act of 30 April 1930 [13], which came into force on 1 July
of the same year.
This Act, in the course of its operation, underwent a certain number
of amendments—which are analysed in detail in the following chapters—
the principal consequences of which were the following. The increase
in the contribution which was to take place as from 1 April 1934 for
the purpose of covering the cost of invalidity insurance, was deferred [14].
A part of the available moneys of the social insurance funds was applied
for the purpose of carrying out an extensive programme of public works
to relieve unemployment [15]. Invalidity insurance was extended to
agricultural workers [16]. As from 1 July 1935 the fixed subsidy paid
by the State was reduced from 540 to 140 millions [17].
Finally, under the Legislative Decrees of 28 and 30 October 1935
[18, 19] a reform was undertaken of insurance for commerce and industry as well as of insurance for agriculture. This legislation, which
came into force on 1 January 1936, plays an important part throughout
this survey.
Account will also be taken, in so far as they fall within the scope of
this study, of the changes introduced by the Decrees of 14 and 15 June
1938 which came into force on 1 July and 1 October 1938 and on
1 January 1939.
172
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
In the departments of Haut-Rhin, Bas-Rhin and Moselle the application of the scheme for commerce and industry as well as of that for
agriculture was deferred to a later date, which was to be fixed by law
at the same time as all the relevant transitional provisions. Until then
" co-ordination decrees " provide for the settlement of all questions
which concern at the same time one of the schemes in question and
the special scheme for Alsace-Lorraine.
This historical account, although very condensed, is sufficient to
show that the technical and financial structure of the general scheme of
social insurance could not be exhibited by considering only the provisions
contained in the Acts and regulations in force at a given date. It was
essential to follow, in some measure at least, the evolution of the scheme
since its inauguration and even to go back to the preparatory investigations. In this process considerable difficulties have arisen. The technical
investigations on which the various Bills discussed between 1921 and
1930 were based appear in the reports of the Parliamentary Commissions
only in an incomplete form. Moreover, the estimates which figure in
the reports refer to benefits which differ both in their amounts and in
their conditions of award and in consequence are not always comparable.
Accordingly, consideration is, as a rule, confined here to those estimates
which appear to be the most important, either by the part they have
played or because of their permanent interest.
French legislation covers simultaneously insurance against sickness,
maternity, invalidity, old age and death. The branches of insurance
relating to these various risks cannot be considered as entirely distinct
nor as entirely intermingled. A consideration of the preparatory investigations and of the evolution of the legislation since its inauguration
shows that the various risks have been grouped sometimes in one way
and sometimes in another. Since the insurances against invalidity,
old age and death alone come within the scope of this volume, the study
is confined to them; but it has not been possible to do so entirely, for,
by reason of the intermingling of the risks in the administrative as
well as in the financial organisation, insurance against sickness and
maternity could not be left entirely on one side.
The general scheme of social insurance includes, in fact, two substantially different parts, applicable respectively to persons employed in
commerce and industry and to those employed in agriculture. This
distinction, which is apparent in nearly all the following paragraphs
has not been maintained as regards a certain number of statistics
resulting from the operation of the scheme, since these statistics refer
to the whole of the insured persons in all occupations.
CHAPTER I
DEMOGRAPHIC ESTIMATES, BASES AND EXPERIENCE
§ 1. — Biometrie Tables
MORTALITY TABLES
In the course of the preparatory investigations, the mortality of the
insured population was estimated on one or other of the tables which
are briefly described below.
In the first place reference was made to the table C.R. constructed
by the National Old-Age Pension Fund from data collected between
1850 and 1880 from the whole of its members except those belonging
to mutual benefit societies. The data related to 237,437 persons aged
from 3 to 100, 31,786"deaths and 1,407,522 years of life [25]. This table
was adopted in 1888 as a basis for the working of the National Old-Age
Pension Fund.
In later investigations the table C.R. was replaced by one of the tables
P.M.F. (male and female population) constructed by the General
Statistical Office of France (Statistique Générale de la France), after
each of the general censuses of 1901, 1911 and 1921.
The table P.M.F. 1921 [36], based on the results of the 1921 census
and the deaths in the years 1920 to 1923 inclusive, was chosen provisionally as a technical basis for the application of the scheme during
its first years. It has been replaced, as from 1 January 1938, by the
invalidity table of the male and female population (P.M.F. 1931), shown
below as table I, which was prepared by the General Statistical Office
of France in accordance with the results of the 1931 census and the
mortality of the French population during the years 1928 to 1933.
INVALIDITY TABLES
In the preparatory investigations concerning the invalidity risk,
recourse was had to the data provided by foreign experiences. •
For the probability of becoming invalid reference was made to various
German data, in particular:
a table based on data relating to the pensions granted in each of the
years 1895, 1896 and 1897, in connection with the general scheme
of workers' insurance against invalidity, old-age and death 1 ;
1
Cf. the section dealing with invalidity, old-age and widows' and orphans'
insurance for workers in Germany: table X, p. 298.
174
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE I.
Age
(years)
Number
living
Age
(years)
5
7
8
9
11
12
13
14
15
16
16
18
19
20
24 . .
25
26
27
28
30
32
34
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
LIFE TABLE P.M.F. 1931
:
100,000
91,890
90,417
89,827
89,455
89,162
88,911
88,701
88,517
88,353
88,201
88,058
87,918
87,771
87,609
87,411
87,165
86,880
86,556
86,193 •
85,793
85,362
84,914
84,476
84,043
83,614
83,187
82,762
82,338
81,912
81,484
81,051
80,613 •
80,166
79,709
79,241
78,762
78,272
77,766
77,243
76,702
76,139
75,553
74,941
74,308
73,645
72,954
72,234
71,483
70,698
69,877
69,015
68,111
67,174
54
55
56
57
58
59
60
61
62
63
65
66
67
68
69
70
71
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88.
89
90
91
92
93
94
95
96
97
98
99
10o
101
102
103
104.
105
106
. . . . . .
Number
living
66,186
65,144
64,044
62,893
61,688
60,425
59,096
57,697
56,226
54,671
53,032
51,286
49,455
47,541
45,532
43,448
41,267
38,997
36,661
34,257
31,779
29.232
26,651
24,082
21,547
19,058
16,649
14,360
12,215
10,209
8,370
6,729
5,306
4,099
3,100
2,296
1,665
1,182
821
561
380
255
170
112
74
49
32
21
13
7
4
2
1
175
FRANCE
the table constructed from figures returned by the pension fund of
the railway staff of Prussia and Hesse in the period 1908 to
1912 1 ;
and Zimmermann's table relating to the invalidity of the German
railway workers—(permanent way, workshop and running staff)
—between 1868 and 1884 a.
The results noted in the working of the scheme for commerce and
industry from 1933 to 1936 were used as a basis for a preliminary
calculation of the rates of becoming invalid. These were calculated from
the observed figures for the number of cases of invalidity (table VII)
and a distribution of " persons exposed to the risk " obtained by dividing the total number of contributors for the preceding year into age
groups in accordance with table VI below. The provisional rates of
becoming invalid obtained in this way are as follows:
Age
Under 20 years
21-25 years
26-30
„
31-35
36-40
41-45
46-50
51-55
56-60
AU ages
Proportion
of persons
becoming
invalid
per hundred
thousand
exposed
to the risk
117.6
202.0
186.6
199.5
211.8
225.9
267.6
351.4
501.0
226.57
The probabilities of cessation of invalidity were borrowed either from
the select table constructed in Germany from the statistics collected
between 1891 and 1897 from the workers' insurance scheme against
invalidity, old age and death, or else from more recent data collected by
the Social Insurance Office in Strasburg [5]. Regard was also had to
an invalid life table constructed in Italy from German data combined
with the general Italian mortality.
The final estimates and the first table drawn up for the purpose of
calculating the present values of matured claims are based on a table
of cessation of invalidity pensions (table II) constructed by the Actuarial
Department of the Ministry of Labour on the basis of the German invalid
cessation rates 1891-1897 and—for durations of invalidity greater than
ten years—the mortality table P.M.F. 1901.
The actuarial section of the General Department of Social Insurance
and Mutual Aid Societies drew up in 1938 a new table of the cessation
of invalidity pensions applicable under the legislation which came into
force on 1 January 1936, according to which invalidity pensions all
cease at the age of 60 years and are replaced by old-age pensions. This
1
Cf. the section dealing with invalidity, old-age and widows' and orphans'
insurance
for workers in Germany: table XI, p. 300.
2
Beiträge zur Theorie der Dienstunfähigkeits- und Sterbens-Statistik, 2. Heft,
Berlin, 1887.
176
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
new table, which is reproduced in table II below, was built up on the
basis of the following data:
1. the German invalidity table based on statistics collected in the
workers' insurance scheme from 1925 to 1930 x ;
2. the invalid cessation rates of the German table of 1906 x ;
3. the general mortality table of the French population, P.M.F.
1931 2 .
TABLE II.
Number of years
elapsed since
commencement
of invai dity
0 year.
1 » .
2 years
3
»
4
»
5
»
6
»
7
»
8
»
9
»
10
»
11
»
12
»
13
»
14
"
15
»
16
»
17
»
18
»
19
»
20
»
TABLE OF CESSATION OF INVALIDITY
Number
of surviving
invalids under
age 60
100,000
81,947
68,496
57,656
48,456
41,653
36,426
32,269
28,762
25,707
23,023
20,688
18,616
16,717
14,943
13,304
11,788
10,396
9,085
7,858
6,742
Number of years
elapsed since
commencement
of invalidity
21 years
. . . .
22
»
23
»
24
»
25
»
26
»
27
» . .
28
»
29
»
30
»
31
»
32
»
33
»
34
»
35
»
36
»
37
»
38
»
39
»
40
»
41
»
PENSIONS
Number
of surviving
invalids under
age 60
"
5,729
4,800
3,962
3,214
2,538
1,936
1,427
1,008
670
442
290
181
107
60
33
18
10
6
3
1
0
SICKNESS TABLES
Since sickness insurance does not come within the scope of this study
it will be sufficient to indicate that in the preparatory investigations
recourse was had to foreign sickness tables.
The sickness actually experienced in the years 1930 and 1931 has
been the subject of various investigations [28, 30, 31] but the rates
obtained will doubtless be amended with the help of later observations.
TABLES RELATING TO COMPOSITION OF FAMILY
The birth rates were based on those which had been previously drawn
up by the. General Statistical Office of France, for the entire female
1
See the section of this volume dealing with the German workers' insurance
scheme:
table IV, p. 286 and table I, p. 278.
2
See above, table I, p. 174.
177-
FRANCE
population, married and unmarried respectively 1. The application
of these rates to the population, divided into age groups, of compulsorily
insured females and wives, not being wage earners, of compulsorily
insured males, produced the following probable annual number of births:
Compulsorily insured females j ™ a ™J je( j ;
Wives, not being wage earners, of compulsorily
insured males
%8¿f0
147,000
The probable number of births for compulsorily insured females
(married and unmarried) was later related to an increased population
and in consequence was increased to 153,100.
For infantile mortality, recoursé was had to a monthly table relating
to the whole of the French population 2.
The number of children according to age of father and the average
number of children living per family were estimated by means of the
" Statistics of families and households in 1911 " 3 , as follows:
TABLE III.
Age of father
FAMILY
Presumed age
of mother
COMPOSITION
Probable
Number of Proportion number of
children of children children
under 16
per
under
per
100 families age 16
100 families
%
U n d e r 20 years . .
20-24 years
25-29 »
. . . . .
30-34
»
35-39 »
40-44 »
45-49 »
50-54 »
55-59 »
60-64 »
U n d e r 20 years
»
20 »
20-24 years
25-29 >
30-34
.
35-39
'
40-44 45-49
'
50-54
'
55-59
'
50
59
95
152
198
231
247
251
250
247
100
100
100
100
100
95
90
80
60
40
50
59
95
152
198
219
222
201
150
99
§ 2. — Population of Insured Persons and Contributors
Under the Legislative Decree of 28 October 1935 the scheme for
insured persons in commerce and industry covered compulsorily, up to
the age of 60, all employed persons and, generally, all persons of French
nationality, male and female, in whatever capacity and wherever they
might be working, and whether for one or several employers, as long
as their total annual remuneration, excluding family allowances, did
not exceed 15,000 francs. (This limit was increased to 18,000 francs
1
GENERAL
la 2population,
STATISTICAL OFFICE OF FRANCE: Statistique du mouvement de
1911,
1912, 1913, p. LVI.
3 Annuaire statistique de la France, 1921, Part II.
GENERAL STATISTICAL OFFICE OF FRANCE.
12
178
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
in towns of more than 200,000 inhabitants and in certain industrial
areas. It was increased by 2,000 francs if the employed person had one
child dependent on him,'by 4,000 francs if he had two children, and if
he had three or more it was increased to 25,000 francs.)
To these provisions, which appear in almost the same form in the
1930 Act and in the Legislative Decree of 28 October 1935, the latter
adds the following stipulations.
Compulsory insurance is extended to the following classes of workers:
persons working at home;
commercial travellers and agents who are not licensed;
employees in hotels, restaurants and cafés;
drivers of public vehicles who do not own their vehicle;
luggage porters working under contract;
attendants and other employees in theatres or places of amusement.
Compulsory insurance does not cover persons whose normal wage
is less than 1,500 francs per annum, nor children who are subject to
compulsory school attendance or who work in the homes and for the
account of their parents.
The scope of the legislation does not include officials employed by
public authorities or public services, railwaymen, miners, seamen,
tramway workers, etc., who are covered by special schemes.
Foreign workers are compulsorily insured under the same conditions
as French workers. They and their dependants, if they are domiciled
in France, are entitled to the benefits due in respect of the contributions
credited to their account. Other benefits are only granted if an agreement to this effect has been concluded with their country of origin.
The Act of 26 August 1936 substituted, for the remuneration limits
(above which the obligation to insure ceases) hitherto in force, two limits
uniformly applicable in all areas:
21,000 francs per annum, if the employed person has no child dependent
upon him;
25,000 francs per annum, if the employed person has at least one child
dependent upon him.
The same Act reduced from 1,500 to 1,000 francs per annum the
lower remuneration limit below which the obligation to insure ceases.
An Act of 31 December 1937 provided that all workers registered
on 31 December 1937 should provisionally remain in insurance. As
from 1 October 1938 the upper limit of remuneration for liability to
insurance was fixed by the Decree of 14 June 1938 [23] at a uniform
figure of 30,000 francs a year irrespective of the family responsibilities
of the insured person. The same Decree extended compulsory insurance
to:
brokers, inspectors and other unlicensed agents of insurance companies ;
the. managers of co-operative societies and the branch managers of
multiple shops or of other commercial or industrial establishments.
The scheme applicable to agricultural workers includes compulsorily:
persons employed in occupations in agriculture and forestry;
persons employed by rural craftsmen, and contractors for threshing
and other agricultural work;
179
FRANCE
persons employed by agricultural trade unions and organisations
carrying on agricultural social insurance;
persons employed by mutual agricultural credit funds and co-operative
agricultural funds;
persons employed by agricultural family allowances funds,
and, in general, persons employed by any regularly constituted agricultural occupational organisations.
Compulsory insurance covers also share-farmers who ordinarily work
only with the help of members of their family (wife, parents, children,
brothers, sisters or collateral relatives) and who do not own a share of
the stock of greater value than 10,000 francs at the time,of becoming
oècupiers of the undertakings.
Children are not deemed to be wage earners as long as they are subject
to compulsory school attendance or when they are employed by their
parents and work for them without receiving any money wage.
The members of a farmer's family, when they live with him and ordinarily work with him and for his account, become compulsorily insurable
as soon as they come within the scope of the legislation relating to
accidents in agriculture.
ESTIMATES OF THE INITIAL INSURED POPULATION
The principal estimates of the initial insured population made in the
course of the preparatory investigations will now be reviewed.
A first estimate [2, p. 138], based on the result of the general census in
1911 and on the losses caused by the war, included all wage-earners
between 16 and 60, agricultural and others, who did not earn more than
10,000 francs per annum and came within the scope of compulsory
insurance. It gave the following figures for the total number and its
distribution into age groups.
TABLE IV.
ESTIMATED INITIAL POPULATION OF INSURED PERSONS
(in thousands)
Age
(years)
Men
Women
16-19
20-24
25-29
30-34
35-39 . . . . .
40-44
45-49
50-54
55-59
1,081
857
759
563
480
459
415
343
274
667
642
427
321
277
245
216
179
161
1,748
1,499
1,186
Total
5,231
3,135
8,366
884
757
704
631
522
435
At the same time it was estimated that the number of wives, not
being wage earners, of compulsorily insured men would reach 1,359,000
and that the number of children under age 16 (not being wage earners)
of compulsorily insured men would be 3,131,000.
180
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
When share-farmers and their wives were transferred from compulsory
to voluntary insurance the above figures had to be reduced [38]. The
total of the compulsorily insured persons then became about 8 million
(5,009,000 men and 3,002,000 women).
In a later investigation [3, p. 161] the estimated compulsorily insured
population of 8,011,000 was distributed into age groups by means of
proportions obtained from a Ministry of Labour enquiry, as at 1 November 1922, concerning persons insured for workers' and peasants'
pensions.
In 1926 the knowledge of the partial results of the census at 6 March
1921 enabled a new estimate to be made, which produced a total compuleorily insured population of 8,310,000 [4, p. 68].
In the final preparatory investigations [7, p. 26] the age distribution
shown in table V was adopted for a total compulsorily insured population
of 8,310,000, based on the final results of the 1921 census.
TABLE
V.
ESTIMATED
I N I T I A L POPULATION OF I N S U R E D
PERSONS
(in thousands)
Age
(years)
U n d e r 20
20-24
oc
fln
30-34
35-39
40-44
45-49
50-54
55-59
Total
Men
Women
Total
1,015
590
625
540
515
500
455
405
325
710
685
455
350
290
245
220
205
180
1,725
1,275
1,080
890
805
745
675
610
505
21
15
13
11
10
9
8
7
6
4,970
3,340
8,310
100
Percentage
In 1930 [9, p. 41] the total number of insured persons was estimated
to be 834 millions (5% millions in commerce and industry and 3 million
in agriculture).
All these estimates were provisional and were subject to alteration
as long as the provisions defining the scope of the Act were not finally
settled.
EXPERIENCE
Statistics obtained during the operation of the scheme do not enable
the total number of the insured to be fixed with precision.
The number of contributors, which can be estimated with greater
precision from the numbers of quarterly contribution sheets, was as
follows (in thousands):
Commerce and industry
Agriculture
1933
1934
1935
1936
5,621
473
5,582
523
5,487
552
5,844
579
As a result of statistical researches [31] based on the analysis of a
considerable number of records relating to insured persons in commerce
and industry, the following age.distribution of contributors has been
obtained:
181
FRANCE
TABLE
VI. —
DISTRIBUTION
BY
OF
CONTRIBUTORS:
EXPERIENCE
Distribution of 100,000 contributors
from analysis of
4,911,100
6,348,486
25,173,707
records
records
records
relating
relating
relating to
to 1933
tO 1935
1930 and 1931
Age
(years)
U n d e r 15
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
Total
AGE
. . . . . .
1,182
13,869
16,219
15,599
12,825
9,680
8,379
7,658
7,117
6,453
1,019
2,536
12,521
15,890
15,199
13,260
10,147
8,343
7,724
6,845
5,998
1,537
693
9,074
14,535
16,129
14,396
11,772
8,610
7,408
6,721
6,170
4,492
100,000
100,000
100,000
§ 3. — Annual Number of Benefieiaries
INVALIDITY PENSIONS
The first estimate [2,. p. 145] divided the invalid pensioners into two
groups according as the duration of invalidity was less or more than
five years. The first group was expected to number 28,000 from the
beginning of the third year (after a qualifying period of two years) and
to reach a constant maximum of 99,000 after the seventh year. The
second group would commence at 13,000 in the eighth year and would
continue to increase up to the figure of 182,000 at the end of 45 years.
The total number of invalidity pensions current each year was then
estimated [3, p. 193], on the basis of Zimmermann's invalidity table *
and the German invalid life table ', to be 32,814 for the first year of
benefit and 430,000 when a stationary position would be reached.
A subsequent estimate based on the table 2 of the railway pensions
fund of Prussia and Hesse (1908-1912) and on a total of 8,742,000
compulsorily insured persons produced an annual crop of 59,000 invalids
aged less than 60. Applying to this supposedly constant crop the invalid
life table constructed by the Actuarial Department of the Ministry of
Labour, the following forecasts were obtained: the number of pensions
in payment would commence at 59,000 at the beginning of the second
year (after a qualifying period of one year) and would reach 316,000 at
the end of 10 years, 506,000 at the end of 20 years, 590,000 at the end
of 30 years, 611,000 at the end of 40 years and finally a maximum of
613,000 as from the forty-third year [5, pp. 83, 87].
In 1929, the crop of invalids was estimated to be 30,000 for the year
1932 and 60,000 for each year following [8, p. 240].
1
2
See above, p. 175.
See the section devoted to invalidity, old-age and widows' and orphans'
insurance for workers in Germany, table V, p. 289.
182
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
TABLE V I I .
OBSERVED N U M B E R S OF I N S U R E D P E R S O N S E N T E R I N G
ON INVALIDITY ( I N S U R A N C E FOR COMMERCE AND I N D U S T R Y )
Age a t e n t r y on invalidity
(years)
16 and under.
Year of entry on invalidity
1933
1935
1934
|
1936
17
18
19
20
36
55
109
206
222
38
98
121
198
383
39
106
147
188
312
69
116
184
224
266
21
22
23
24
25
254
190
156
172
184
387
317
283
245
311
406
450
402
380
393
384
512
451
514
446
26
27
29
30
209
232
180
198
191
314
286
301
280
359
383
386
360
363
344
449
499
433
439
412
31
32
33
34
35
198
179
159
172
161
282
306
267
262
238
381
389
368
350
327
461
417
422
480
442
36
37
39
40
144
117
140
117
136
230
223
206
213
196
348
290
317
305
24-7
460
458
402
404
357
41
42
43
44
45
135
119
121
133
105
177
172
195
155
171
273
247
268
240
260
330
300
314
300
306
46
47
48 . . .
49
50
136
104
118
126
117
178
202
200
176
212
253
279
264
281
277
325
332
305
317
327
51
52
53
54
55
127
126
122
150
168
226
222
238
228
257
279
297
318
329
331
348
385
389
381
425
56
57
.58 . .
59
60
189
191
81 1!
270
318
360
403
432
418
418
483
529
491
286
28
38
67 1
71 i
Total
I n c o m p l e t e figures.
6,623
316
151 !
177
i
10,585
159 1
13,949
16,992
Total
183
PRANCE
Experience
Scheme for commerce and industry
Cases of invalidity. — Table VII opposite shows the number of persons
becoming invalid in each age group in the years 1933, 1934, 1935 and
1936.
Cessation of invalidity pensions. — The statistics of pensions which
lapsed because of death or the return of the pensioner to health cover
only a small number of years. It will suffice to reproduce the following
table which shows, in the case of 10,000 invalids whose pensions began
during the years 1933,1934 and 1935, the number of those still in a state
of invalidity after a certain number of months or years (no account being
taken of cases in which the pension was suspended).
TABLE V I I I .
Year of
entry on
invalidity
1933 . .
1934 . .
1935 . .
CESSATION OF
INVALIDITY
Initial
Number of invalids after
number of
invalids 3 months 16 months 19 months | 1 year | 2 years | 3 years
10,000
10,000
10,000
9,547
9,473
9,463
9,054
8,997
9,037
8,566
8,540
8,785
8,187
8,225
8,700
7,158
7,301
6,486
i
i
i
i Not established.
The number of current pensions at the end of 1936 was 37,272.
Agricultural scheme
Table IX below shows the number of persons becoming invalid in
each age group during the years 1933, 1934, 1935 and 1936.
The total number of invalids is still too small for the statistics of
cessation of pensions to provide any conclusive evidence.
On 31 December 1936 the number of current pensions was 1,662.
OLD-AGE PENSIONS
The application of the 1911 tables P.M. (males) and P.F. (females)
to a" population of 7,800,000 compulsorily insured persons produced
[38, p. 72] an annual crop of 73,000 old-age pensions commencing at
age 60.
On the basis of the age distribution resulting from the 1911 census
(adjusted for war losses) and the mortality table P.M.F. 1901, the oldage pensions arising from a population of 8,742,000 compulsorily
insured persons were estimated as follows [5, pp. 121, 125]:
470,000 for the 5 years' crops coming into payment simultaneously in
the sixth year (after a 5 years' qualifying period) :
82,000 for each subsequent annual crop;
721,000 for the total number of pensions in payment at the beginning of
the tenth year;
960,000 for the total number of pensions in payment at the beginning
of the fifteenth year ;
1,100,000 for the total number of pensions in payment at the beginning
of the twentieth year;
1,200,000 for the total number of pensions in payment when a stationary
position would be reached.
184
ACTUARIAL TECHNIQUE AND FINANCIAL
TABLE I X .
ORGANISATION
OBSERVED NUMBERS OF INSURED PERSONS ENTERING
ON INVALIDITY (INSURANCE FOR AGRICULTURE)
Age at entry on invalidity
(years)
Year of entry on invalidity
1933
_
1935
|
Total
1936
7
3
8
14
1
8
4
11
12
1
6 •
9
12
11
4
22
18
36
49
3
4
1
5
3
17
11
9
5
21
18
19
16
9
12
15
13
17
26
21
53
47
43
45
57
2
2
9
6
6
23
17
9
5
16
18
20
17
13
14
18
23
25
18
15
61
62
60
42
51
31 . . .
32
Q
3
34
35
5
5
7
3
4
16
17
10
18
20
17
25
19
19
30
16
22
12
20
18
54
69
48
60
72
36
37
38
39
40
2
2
4
3
5
8
12
13
6
7
19
19
14
11
12
22
17
15
18
14
51
50
46
38
38
41
42
43
44
45
3
7
2
5
7
9
5
8
12
8
17
10
10
16
13
11
8
15
10
16
40
30
35
43
44
46
47
48
49
50
3
7
1
3
3
13
7
16
12
17
13
11
19
16
15
15
10
13
19
20
44
35
49
50
55
51
52
53
54
55
8
4
2
1
8
11
12
14
12
25
18
12
20
26
18
15
11
24
26
28
52
39
60
65
79
56
57
58
59
60
5
17
2
—
—
24
35
41
4
11
29
37
28
42
7
32
54
51
50
18
90
143
122
96
36
191
588
754
850
2,383
16 a n d
17
18
19
20
under
21
22 . . .
23
24
25
2
1
2
5
12
1934
.
26
27
28
29
30
•
Total
185
FRANCK
Experience
The amount of the old-age pensions which began to be paid before
1 July 1935 could not be fixed at the guaranteed minimum x but had to
remain below that figure because the pensioners had not paid five
years' contributions. The number of these pensions current on 31 December 1936 was 59,650.
Insured persons who began to draw their pension after 1 July 1935
are, if necessary, granted supplements bringing the pension up to the
minimum guaranteed under the Social Insurance Act. Insured persons
born between 1 July 1865 and 1 July 1875, who had reached the age
of 60 years or over on 1 July 1935 and requested the payment of their
pension as from that date, form what is known as the " exceptional
crop ". This group is very large because it includes the elderly insured
persons who joined the scheme on 1 July 1930 and waited until they had
completed the five contribution years required by the legislation.
On 31 December 1937 the number of old-age pensions granted could
be classified as follows, according to the date at which they begin; the
figures concern the scheme for commerce and industry and the agricultural scheme.
Date of beginning of pension
1 J u l y 1935
1 October 1935—1 J u l y 1936
1 October 1936—1 J u l y 1937
Total number
of pensions
granted
Number of
pensions granted
including
a supplement
268,045
77,174
71,962
218,389
58,783
45,249
. . .
. . .
On 31 December 1937, for the same dates of beginning of pension,
48,762 claims were still under consideration (in the scheme for commerce
and industry and in the agricultural scheme).
1
Cf. below, Chapter II, section 5, p. 202.
CHAPTER II
FINANCIAL ESTIMATES, BASES AND EXPERIENCE
The resources of the insurance scheme are constituted by the contributions levied on insured persons and their employers, grants from public
authorities and miscellaneous receipts. In paragraphs 1 to 3 below
each of these classes of receipts is dealt with separately, with mention of
the essential provisions which mark the various stages in the progress
of the legislation.
The liabilities of the insurance scheme include the cost of benefits
and administrative expenses. In sections 4-10 below, each of the main
items of expenditure will be examined separately. In each case the
principal clauses governing the award and calculation of benefits
under the 1930 legislation, as amended since that date, in particular
by the Decrees of October 1935 and of June 1938, will be successively
indicated.
§ 1. — Contributions of Insured Persons and Employers
METHOD OF FIXING AND SCALES OF CONTRIBUTIONS
The method of fixing the contributions of insured persons and employers in relation to wages and, in particular, the limits of the wage
taken into consideration for this purpose have been modified from time
to time.
Government Bill, 1921
The 1921 Government Bill [1] divided insured persons into six wage
classes, in each of which a basic wage was fixed, 5 per cent, of this
being taken as the contribution of the insured person and also as that
of the employer. Above a uniform limit fixed at 10,000 francs per
annum an employed person was not subject to compulsory insurance.
Chamber of Deputies Bill, 1924
The Chamber of Deputies Bill of 1924 [2] maintained the provisions
of the Government Bill of 1921 as regards the calculation of contributions, but widened the scope of the scheme by increasing the upper limit
of the sixth class by 2,000 francs for each dependent child under the
age of 16.
Act of 5 April 1928
The 1928 Act provided that the joint contribution, payable in equal
parts by the insured person and employer, should be fixed at 10 per cent.
187
FRANCE
of the total amount of wages up to a maximum of 15,000 francs. The
maximum annual remuneration compatible with liability to insurance
was fixed at 18,000 francs, excluding family allowances. This figure
was increased by 2,000 francs for each dependent child after the first,
and decreased by 3,000 francs for persons with no dependent child.
In studying the legislation which came into force in 1930 and its
amendments, a distinction must be made between insurance in commerce
and industry and agricultural insurance.
Insurance for commerce and industry
Act of 30 April 1930. — In order to fix the rates of contribution the
Act of 30 April 1930 divided insured persons into five wage classes. The
contribution of the insured person, still equal to that of the employer,
was fixed in each class according to the basic wage. The five wage
classes, the basic wage, the rates of daily, weekly, monthly, and annual
contributions were determined, until 1 April 1934, for non-agricultural
insurance as follows:
Limits of wage class
t. Under 8 francs (1 to
2,399)
2. 8 frs. to 14 fr. 99. (2,400
to 4,499)
3. 15 frs. to 19 frs. 99 (4,500
to 5,999)
4. 20 frs. to 31 frs. 99. (6,000
to 9,599)
5. 32 frs. and over (9,600
and over)
Daily
basic
wage
Contribution of insured person,
equal to that of employer
per
day
per
week
per
month
per
annum
(francs)
(francs)
(francs)
(francs)
6
0.25
1.50
6
72
12
0.50
3.00
12
144
18
0.75
4.50
18
216
24
1.00
6.00
24
288
36
1.75
10.00
40
480
(francs)
The annual joint contribution represents 8 per cent, of the annual
basic wage. The fifth class has as its upper limit a wage of 15,000 francs
per annum. This maximum is increased to 18,000 in towns of more than
200,000 inhabitants and in a certain number of industrial areas, the list
of which is fixed by Decree. It is increased by 2,000 francs if the insured
person has one dependent child, by 4,000 if he has two, and it is increased
to 25,000 francs if the insured person has three or more dependent
children. In this fifth class the annual basic wage remains fixed in all
cases at 12,000 francs. In order to cover the cost of the invalidity risk
these rates of contribution are increased by one-eighth as from 1 April
1934, and by another eighth as from 1 April 1940.
Modification of the 1930 Act. — The Finance Act of 28 February 1934
deferred the date of coming into force of the increase by one-eighth of
the rates of contributions which it had been provided should take place
as from 1 April 1934.
Decree of 28 October 1935. — The Decree of 28 October 1935, substituted from 1 January 1936 for contributions fixed by wage classes
contributions proportional to the actual wage of the individual. The
actual wage is defined as the total cash remuneration—excluding family
188
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
allowances—increased by the amount of tips and payments in kind
valued as a lump sum. The contribution is payable as to one-half by
the insured person and as to one-half by the employer 1 . It is fixed at
8 per cent.2 of the insured wage, that is to say 8 per cent, of the actual
wage to the maximum amount of:
1,000
500
' 240
40
5
francs a month in the case of monthly wages;
francs a fortnight in the case of fortnightly wages;
francs a week in the case of weekly wages;
francs a day in the case of daily wages; and
francs an hour in the case of daily work of less than the legal
duration.
Act of 26 August 1936. — The upper wage limits on which the contributions are calculated were modified from 1 January 1937 by the Act of
26 August 1936.
The remuneration of the insured person is taken into account in
calculating the contribution to the maximum amount of
1,250
625
315
50
8
francs a month in the case of monthly wages;
francs a fortnight in the case of fortnightly wages;
francs a week in the case of weekly wages;
francs a day in the case of daily wages; and
francs an hour in the case of daily work of less than the legal
duration.
In the case of wages less than 1,500 francs a year (and greater than
1,000 francs a year), the contribution is calculated on the basis of an
annual amount of 1,500 francs.
Decree of 14 June 1938. — The raising of the limit of remuneration
for liability to insurance resulted in raising the upper wage limit for
the purpose of calculating contributions. These upper wage limits were
fixed, as from 1 July 1938, as follows:
1,500 francs a month in the case of monthly wages;
750 francs a fortnight in the case of fortnightly wages;
380 francs a week in the case of weekly wages;
72 francs a day in the case of daily wages;
9.50 francs an hour in the case of daily work of less than the legal
duration.
The maximum amount for every half-day of employment of less
than five hours is 36 francs.
Agricultural insurance
Act of 30 April 1930. — The Act of 30 April 1930 contains certain
provisions applicable only to insured persons in agricultural occupations.
The division into five wage classes specified for industry and commerce
is maintained for agriculture. The contribution of the insured person,
and the equal contribution of the employer, each consist of two parts:
(1) a portion, used to cover the risk of old age, which is fixed at a
quarter of the contribution payable by an insured person in
industry or commerce in the same wage class;
1
The employer's share only is payable where the employed person is over
602years of age or a pensioner, and consequently is not liable to insurance.
As a transitional measure the rate of contribution was reduced to 7 per
cent, of the insured wage for the year 1936.
189
FRANCE
(2) a portion, used to cover the risks of sickness, maternity and
death, which is compulsory up to 5 francs a month.
The wage which is taken into consideration in dividing the insured
persons into classes, and which consequently enters into the calculation
of the contribution, is not the actual wage but a mean daily wage which
is fixed in each department.
Decree of 30 October 1935. — The Decree of 30 October 1935 relating
to insured persons in agricultural occupations fixes in a uniform manner
as from 1 January 1936 the rates of the joint contribution, payable in
all cases as to one-half by the insured person and as to one-half by the
employer, in the case of children under 16, women and men respectively :
Contribution of insured person,
equal to that of employer
Class of insured person in agriculture
Children under 16
Men
daily
monthly
annual
(francs)
(francs)
(francs)
0.30
0.40
0.50
6
8
10
72
96
120
These contributions are used partly to cover the risks of sickness
and maternity and partly for 1 old age, in accordance with coefficients
which will be dealt with later .
Decree of 15 June 1938. — The number of classes of insured persons
was increased from three to four. The first now includes not only children
up to the age of 16 years but also apprentices, probationers and workers
with reduced working capacity; a new class was introduced for workers
of both sexes whose annual remuneration exceeds 12,000 francs. The
contribution rates for the first three classes remain the same and a
higher rate was introduced for the fourth. The classes of insured persons
and the contributions for each class are shown in the following table:
Contribution of insured person,
equal to that of employer
Class
1.
Children under 16, apprentices, probationers and workers with reduced
2.
3.
4.
Women . . . . ' . •
Men
Men and women whose annual salary
i Page 221.
daily
monthly
annual
(francs)
(francs)
(francs)
0.30
0.40
0.50
6
8
10
72
96
120
0.75
15
180
190
ACTUAKIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
The apportionment of these contributions between the various risks
will be considered later l.
ESTIMATES RELATING TO INSURED WAGES AND CONTRIBUTION YIELD
In the Statement [2] on the financial and actuarial bases of the Social
Insurance Bill made on 23 February 1922 by Mr. Cahen-Salvador before
the Social Insurance Commission of the Chamber of Deputies, the
estimated population of 8,366,000 compulsorily insured persons is subdivided into six wage classes as follows:
Wage class
(francs)
1.
2.
3.
4.
5.
6.
Less t h a n 1,200
1,200 to 2,400
2,400 t o 4,000
4,000 to 6,000
6,000 to 8,000
8,000 t o 10,000
Total
. . . . . .
Men
Women
Total
(in thousands)
145
657
2,250
1,613
411
155
380
1,561
771
392
22
9
525
2,218
3,021
2,005
433
164
5,231
3,135
8,366
In 1925, the Report [3] of the Senatorial Commission on Hygiene
had as its principal object the estimation of the total of insured wages.
After the necessary adjustments had been made to the statistics resulting
from the operation of the 1898 Act on workmen's compensation, it was
considered that the annual total of wages would be between 45 and
50 thousand million. Accordingly the average annual wage, on the
assumption of 8 million 2 insured persons, was taken to be 5,000 francs.
In the Recommendation [5] submitted in 1927 by the Senatorial
Finance Commission the total amount of insured wages was estimated
first at 42 thousand million by an optimistic estimate and then at
38.3. thousand million by a more cautious estimate, the latter relating
to 8,742,000 compulsorily insured persons divided in the following
manner:
Thousands
1st
2nd
3rd
4th
5th
6th
class:
class:
class:
class:
class:
class:
less than 1,200 francs
1,200 to 2,400 francs
2,400 to 4,000 francs
4,000 to 6,000 francs
6,000 to 8,000 francs
8,000 francs and above
268
1,403
2,681
2,573
1,241
576
These figures were borne out by the results of two investigations: one
relating to 608,000 workers in the metallurgical, machine and electrical
1
2
Page 221.
. . .
From the preceding estimate (8,366,000) was deducted the number of
share-farmers (566,000) who were assumed to be no longer compulsorily insured, and the result was increased to 8 million to allow for the movement
towards industrialisation and for the increasingly important factor of the
immigration of foreign workers.
191
FRANCE
industries (226,000 in the district of Paris and 382,800 in the rest of
France), the other arising out of the results obtained from 1922 to 1925
by the local general (sickness insurance) fund of the City of Strasburg.
In 1929, as the result of a rise of wages—as was proved by the statistics
of insured wages from companies officially authorised to effect insurance
against industrial accidents—the Senatorial Commission on Hygiene
[8, pp. 227-230] substituted for the preceding estimates the figures
of 64 thousand million for the total of insured wages (46 thousand
million in commerce and industry and 18 thousand million in agriculture).
Finally the Recommendation [9, p. 41] submitted in 1930 by the
Senatorial Finance Commission, on the basis of the following distribution
by wage class:
Per cent.
1st class: less than 4,500 francs
35
2nd class: 4,500 to 6,000 francs
15
3rd class: 6,000 to 9,600 francs
25
4th class: 9,600 to 15,000 francs
25
Total
100
arrives at an average daily wage of 21.90 francs, with 300 days in thé
year, and consequently brings out an annual total of insured wages of
52 thousand million (36 thousand million in commerce and industry
and 16 thousand million in agriculture).
To support the estimates drawn up in the course of the preparatory investigations, the annual contribution yield has been deduced, either in total or for one or more of the risks, from the total of
the insured wages by applying the appropriate factors, which will
appear in the following chapter when the various apportionments
which have been successively applied to the total contribution come to
be reviewed.
EXPERIENCE AS REGARDS INSURED WAGES
AND CONTRIBUTIONS COLLECTED
Distribution of Contributors by Wage Class
Reference has been made in the preceding paragraphs to the results
that can be deduced from the actual experience of the operation of the
scheme as regards the total number of contributors and their age distribution 1. For the purpose of ascertaining the amount of wages, analyses have been made of numbers of quarterly contribution sheets
amounting to 25,173,707 for the years 1930 and 1931, to 6,348,486 for
the year 1933 and to 4,911,100 for the year 1935 2. Both these came
from the non-agricultural scheme and had been apportioned by departmental offices. In this way were obtained [31, p. 220] the figures of the
following table, which shows for each age group the proportion of
insured persons whose remuneration is less than the respective limits
of the various wage classes:
1
2
See p. 181.
Up to 1 January 1936 stamps representing the contributions in respect
of sickness and maternity were affixed to quarterly sheets.
192
ACTUARIAL T E C H N I Q U E
TABLE X.
DISTRIBUTION
AND FINANCIAL
ORGANISATION
OF CONTRIBUTORS BY AGE GROUP
AND WAGE CLASS
Percentage of contributors whose annual wage was
Age
(years)
in 1930-1931 less t h a n
in 1935 less t h a n
in 1933 less t h a n
Fr.
Fr.
Fr.
Fr. Fr.
Fr.
Fr.
Fr.
Fr.
Fr.
Fr.
Fr.
2,400 4,500 6,000 9,600 2,400 4,500 6,000 9,600 2,400 4,500 6,000, 9,600
Under 1
15-19 .
20-24 .
25-29 .
30-34 .
35-39 .
40-44 .
45-49 .
50-54 .
55-59 .
60-64 .
28.5
8.9
3.4
3.2
3.8
5.1
5.9
7.2
8.8
10.9
13.0
All ag(;s
77.5
36.6
14.8
9.9
10.4
12.9
14.6
17.0
19.7
23.2
26.6
91.5
59.8
29.2
19.2
18.8
22.4
24.4
27.2
30.0
34.0
37.8
97.7
91.0
68.8
53:8
51.0
54.0
56.2
59.7
63.5
68.5
72.2
6.1 18.2 30.5 64.1
54
27
6
4
5
6
7
9
11
15
19
94
70
25
13
12
13
16
19
23
28
34
98
87
42
24
21
22
26
29
33
39
45
99
99
83
64
57
57
60
63
66
72
77
7.1 19.8 31.5 66,0 10
24
35
69
35.9
9.5
3.6
3.3
3.9
5.1
6.3
7.6
10.0
13.6
16.9
87.1
39.0
15.5
10.3
10.3
12.7
14.9
16.9
20.8
26.1
31.2
96.2
61.7
29.5
19.6
18.6
21.7
24.4
26.5
30.8
36.5
42.2
99.0
92.7
71.5
57.2
53.8
55.5
57.4
59.2
63.3
70.2
75.4
Average Daily Wage
The two statistical analyses which have just been mentioned have
also rendered possible the calculation of the average daily wage for each
age group. In this way the three columns in table XI have been constructed, which show that wages increase with age up to a maximum
value corresponding to the group of insured persons aged 30 to 34, and
thereafter diminish slowly but continuously.
TABLE X I .
Age
(years)
15-19
20-24
25-29 . . . .
30-34
35-39
40-44
45-49
50-54
55-59 . . . :
60-64
AVERAGE DAILY
WAGE
Year
1930-1931
Year
.1933
Year
1935
Fr.
Fr.
Fr.
12.43
18.76
24.91
27.60
27.90
27.10
26.56
25.76
24.86
• 23.68
22.68
10.98
18.27
24.51
27.16
27.58
26.97
26.38
25.84
24.70
23.01
21.53
9.36
13.08
21.66
25.86
26.88
26.70
25.86
25.02
24.06
22.44 ,
20.88
193
FRANCE
Total Amount of Contributions Collected
Since the inauguration of the scheme the contributions of compulsorily
insured persons, agricultural and non-agricultural, have yielded the
following annual amounts:
1,496 million francs in 1930 (second half-year)
3,562
3,261
3,271
3,176
3,086
2,640
4,186
„
„
.,
„
„
„
„
„
„
1931
1932
1933
1934
1935
1936
1937
To these~figures must be added the yield of the contributions paid
in cash directly by the organisations effecting agricultural social
insurance, which amounted to
35.1 million francs from 1.VII.30 to 31.III.32
20.5
28.5
28.7
28.5
23.1
„
,.
„
„
1.IV.32
11-33
1.1.34
1-1-35
1.1.36
„
„
„
„
„
31.XII.32
31.XII.33
31.XII.34
31.XII.35
31.XII 36
§ 2. — State Aid
The various successive plans which were drawn up during the course
of the preparatory investigations each entailed a new estimate of the
burden to be borne by the State. These estimates depend on the particular terms of the plan concerned and are not, in general, comparable
inter se. Moreover, the State subsidies are not always fixed in advance:
in certain cases it has been provided only that eventual deficits would
be made good by the public authorities. For this reason the object of
this paragraph is limited to a consideration of the subsidies which have
been included in the legislation subsequent to and including the 1930
Act and which consequently became effective. Among these the following
are the most important:
(1) a fixed
scheme
(2) a grant
insured
subsidy to be used, in particular to wind up the 1910
of workers' and peasants' pensions 1,
to cover the additional benefits payable to agricultural
persons.
Each of these two State contributions will be examined in turn.
FIXED SUBSIDY BY THE STATE
According to the 1930 Act a sum of 540 million francs was to be paid
by the State each year. The purposes of this subsidy—which are revealed by a study of the financial scheme—are the winding-up of the
1
See Introduction, p. 170.
13
194.
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
1910 scheme of workers' and peasants' pensions and the guarantee of
the financial stability of the insurance scheme.
The Decree of 16 July 1935 reduced this fixed annual payment to
140 million francs as from 1 July 1935, subject to a State guarantee.
The Decree of 28 October 1935 confirms this reduction and formulates
the accompanying guarantee in the following terms:
" Nevertheless, if a deficiency is disclosed in the Augmentation Fund
it will be immediately made good by a payment from the general budget.
The total of payments of this nature may not exceed the sum represented by the capitalisation of an annuity of 400 million francs as from
1 July 1935 at a rate of interest fixed for each year retrospectively 1
by agreement between the Ministers of Labour and Finance,-in accordance with that applicable to the calculation of the old-age insurance
scales."
On account of the reduction which it has suffered, the fixed State
subsidy is no longer sufficient to cover the cost of winding up the workers'
and peasants' pensions scheme. This insufficiency will-continue for a
certain number of years, after which the deficit which will have accumulated should be made good by annual surpluses. Thus the efficacy
of the State subsidy in establishing the financial equilibrium of the
insurance scheme has disappeared for a period which will certainly
extend beyond a decennium.
The sums actually paid by the State, under the heading of this fixed
subsidy, since the inauguration of the scheme are indicated by the
following figures, against which is shown the actual expenditure on
workers' and peasants' pensions:
Year
Payment
made by
the State
Actual
expenditure
on workers'
and
peasants'
pensions
(million francs)
1930 (second half)
1931
1932
1933
1934
1935
1936
1937
270.0
540.0
540.0
508.5
540.0
340.0
140.0
140.0
85.5
527.0
415.6
384.1
349.7
323.6
288.8
262.5'
GRANTS ADDED TO CONTRIBUTIONS OF AGRICULTURAL INSURED PERSONS
Under the 1930 Act the State must make an annual grant to guarantee
the payment of additional benefits to insured persons in agricultural
occupations. This grant is used:
(1) to increase the contribution paid for old-age insurance by each
insured person over age 30 by adding thereto 80 percent.;
1
4.40 per cent, for the year 1 July 1936-30 June 1937.
195
FRANCE
(2) to increase each contribution paid for insurance against sickness,
maternity and death, by a fixed amount of 10 francs a month.
The Decree of 30 June 1934 reduced the increase—payable by the
State—of the contribution for insurance against sickness, maternity
and death to 8 francs a month but, on the other hand, added to it an
increase of 1 franc a month for the insurance of agricultural workers
against invalidity.
As from 1 January 1936, the increase of 9 francs a month has been
replaced, according to the Decree of 30 October 1935, by 90 per cent, of
that fraction of the contribution allocated to sickness and maternity
insurance. This increase is applied as to two-thirds (60 per cent.) to
sickness and maternity insurance and as to the other third (30 per cent.)
to the insurance against invalidity and death. According to the Decree
of 15 June 1938, this addition is fixed as from 1 January 1939 at 80 per
cent, of the fraction of the contribution allocated to sickness, maternity
and invalidity.
Since 1 January 1936 there has been no increase in the old-age
contributions of insured persons over the age of 30 years, but the State,
in order to guarantee the minimum pensions, makes a grant equal to
40 per cent, of the total amount of contributions credited in the preceding
year to the individual old-age insurance accounts.
The sums paid by the General Guarantee Fund to the agricultural
insurance funds in compensation for the supplements paid to insured
persons reached the following amounts:
1930-31
1932
1933
1934
1935
1936
•
Thousand
francs
8,138
87,478
70,326
65,164
65,619
43,815 1
i Not including the increase of contributions paid under the Decree ol 30 October
1935.
The following amounts were reimbursed by the State to the General
Guarantee Fund:
Thousand
francs
27,355
61,328
98,048
120,705
1933
1934
1935
1936
OTHER
STATE
CONTRIBUTIONS
Savings on Cost of Assistance
The 1930 Act provided for the annual payment'by the^State, the
departments and communes, for the benefit of the insurance scheme, of
one-half of the savings which they had made, owing to the Operation
of the social insurance scheme, on the average credit made to cover
the cost of assistance during the five years immediately preceding the
coming into force of the Act.
Kffl,íáB*'^
This item gave rise to no payments. The Decree of 28flOctober 1935
did away with it.
196
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
(2) Reimbursement of Expenses in Respect of Workers aged 60 to 65
at the Date of coming into Force of the Act
This reimbursement, which was prescribed by the 1930 Act, was not
altered by the Decree of 26 October 1935.
(3) Grant in Aid of the Sickness Insurance of Old-age Pensioners
This grant was transferred to mutual-aid societies when sickness
insurance for old-age pensioners was detached from the compulsory
insurance scheme by the Decree of 28 October 1935.
§ 3. — Sundry Resources
The 1930 Act, like the Decree of 28 October 1935, allocates to the
social insurance scheme a certain number of other permanent resources1:
(1) The unused portion of the annual revenue fixed by Article 4 of
the Act of 31 December 1895 (product of the sale of the Grown jewels).
Under this heading there were paid:
167 thousand francs for the year 1931
128
„
„
„ „ 1932
136
„
„
„ „
1933
151
„
„
„ „
1934
140
„
„
„ two years 1935 and 1936.
(2) The total amount of fines (basic amount and additional tenths).
Under this heading the following sums have been paid to the fund:
5 thousand francs in 1933
73
„
„
„ 1934
127
„
„
„ 1935
241
„
„
„ 1936
(3) A special payment fixed annually by the Finance Act to be made
out of the Treasury's share of the supplementary royalties payable
by the Bank of France and out of the State's share of gaming revenue.
The payments made under this heading have been 5 million francs in
1932 and 3 million francs for each of the following years.
(4) Pension instalments lapsing under the five-year period of prescription and repayable capital sums which are not claimed by dependants
of insured persons who have been dead for more than five years.
§ 4. — Invalidity Benefits
INVALIDITY PENSIONS
1930 Act and Decree of 30 June 1934
The 1930 Act defines as follows the conditions of award and the
amount of the invalidity pensions in the compulsory scheme applicable
to industry and commerce: " an insured person who, on the expiry of
1
Interest on accumulated funds forms part of the financial mechanism;
see Chapter III.
FRANCE
197
the time limit of six months covered by sickness insurance or, in the
event of an accident not covered by the Industrial Accidents Act, after
healing of the injury, is medically certified to be still suffering from a
disorder or infirmity which reduces his working capacity by at least
two-thirds shall be entitled to an invalidity pension."
An insured person has the right to benefit from invalidity insurance
when he has been registered for at least two years and has to his credit
a minimum of 480 daily contributions paid during the two years preceding
the commencement of the sickness or the accident.
A person who entered into insurance before the age of 30 is entitled
to a pension equal to at least 40 per cent, of the average wage calculated
from the compulsory contributions paid each year (from the age of 16
if he is over that age). This percentage is increased, up to a maximum
of 50 per cent., by 1 per cent, of the wage for each year of insurance
beyond the thirtieth during which at least 240 daily contributions were
paid. For a person who entered into insurance after the age of 30 the
rate of 40 per cent, is reduced by one-thirtieth for each year between 30 and
the age of entry into insurance, with a guaranteed minimum. This
minimum is fixed at 1,000 francs if the insured person has contributed
for at least six years; it is 600 francs when the qualifying period has been
completed and increases by 100 francs for each subsequent year during
which 240 daily contributions were paid.
In all cases the pension is increased by 100 francs a year for each
child under 16 years of age.
The Decree of 30 June 1934 extends the benefit of invalidity pensions
to insured persons in agricultural and forestry occupations. The invalidity pensions are calculated according to the same rules as in the nonagricultural scheme and on the basis of the contributions actually
credited to the individual accounts for old-age insurance.
Decrees of October 1935
As from 1 January 1936, by virtue of the Decrees of October 1935,
the invalidity pensions are subject to the following rules:
Insurance for commerce and industry
In order to claim benefits under the invalidity insurance system, the
insured person must have been registered for at least two years before
the beginning of the quarter in which the sickness or accident occurred
and must have had deducted from his salary a sum of at least sixty
francs for each of those years. 1
For an insured person who entered before the age of 30, the invalidity
pension is equal to 40 per cent, of the average annual wage on the basis of
which were calculated the contributions paid since his entry into
insurance.
For an insured person registered after age 30, this pension is reduced
by one-thirtieth for each year or fraction of a year of age between thirty
1
Under the Decree of 14 June 1938, an insured person who ceases to
be liable to insurance before having acquired his right to old-age insurance
benefits and who is not receiving invalidity insurance benefit retains his right
to a possible invalidity pension on condition that he asks for the final settlement of this pension before the end of the 18 months following the date on
which he ceases to be liable to insurance.
198
ACTUARIAL T E C H N I Q U E
and the age at entry.
case be less than:
AND FINANCIAL
ORGANISATION
Nevertheless the invalidity pension can in no
1,000 francs if the insured person proves 6 or more contribution years,
900 „
„ „
„
„
„
at least 5 contribution years,
800 „
„ „
„
„
„
„ „ 4
700 „
„ „
„
„
„
„ „ 3
600 „
„ „
„
„
„
„ „ 2
Only those years are deemed to be contribution years during which the
deductions from wages on account of contributions total at least
60 francs.
'
From age 60 the invalidity pension is replaced by the old-age pension
to which the insured person is entitled by virtue of the payments made
by his successive employers as well as by virtue of the contributions
paid annually in their stead by the invalidity fund for the purpose of
old-age insurance. These contributions are fixed in conformity with
a scale constructed by the Minister of Labour according to the wage
on the basis of which the invalidity pension had been calculated.
The invalidity pension continues to be increased by 100 francs a year
for each child under 16 years of age.
Agricultural insurance
In order to claim benefit when he becomes invalid an insured person
must have been registered for at least two years before the beginning
of the quarter in which the sickness or accident occurred, and for each
of these two years his individual old-age insurance account must have
been credited with contributions totalling at least 100 francs for men,
60 francs for women and 20 francs for children up to the age of 16.
For an insured person registered before the age of 30, the pension
is equal to ten times the average annual contribution appearing in his
individual account.
For an insured person registered after the age of 30, it is reduced
by one-thirtieth for each year or fraction of a year of age between 30
and the age at entry, but the invalidity pension can in no case be less
than:
800 francs if the insured person proves 4 contribution years
Only those years are deemed to be contribution years during which
the insured person's individual account is credited with at least 100,
60 or 20 francs, respectively for men, women, and children under 16.
Decree of 15 June 1938
From 1 January 1939 onwards, the amount of contributions which
must have been credited to the individual old-age insurance account
during each of the two years of the qualifying period for invalidity
insurance is reduced:
from 20 to 16 francs for children under 16 years (being fixed at 16 francs for
all insured persons in the first class);
from 60 to 48 francs for women (second class) ;
from 100 to 80 francs for men (third class).
It is fixed at 100 francs for insured persons in the fourth class.
FRANCE
199
The rate of individual pension granted to an insured person registered
before the age of 30 years is increased from 10 to 15 times the average
annual contribution standing to his account; it automatically follows
that the invalidity pensions granted to insured persons registered after
the age of 30 are increased by half their original value (the minimum
rates applicable when the number of years of payment is less than five
remain unchanged).
Estimates made in the Course of the Preparatory Investigations
The Government's Bill of 1921 [1] distinguished pre-invalidity, which
was deemed for five years to be a continuation of sickness (after the
sixth month), and permanent invalidity beginning at the expiration of
the period covered under the heading of sickness and pre-invalidity.
In the Statement on the financial and actuarial bases of the Social
Insurance Bill [2, pp. 138 et seq.] already cited the costs of pre-invalidity
and permanent invalidity are estimated to be as follows, for a total of
8,366,000 compulsorily insured persons:
Temporary payments for pre-invalidity (from 7th to 66th month)
ranging from 45 to 250 francs a month according to wage class:
26.4 million francs for the 3rd year of operation
93.4
„
„
„ „ 7th and subsequent years of operation.
State contribution to pre-invalidity (20 francs a month for the first
three wage classes in cases of total incapacity):
3.6 million francs for the 3rd year of operation
12.9
„
„
„ „ 7th and subsequent years of operation.
Pensions for permanent invalidity are constituted by the sums
accumulated in the individual old-age insurance accounts, with the
following additions:
(1) a complementary pension, the charge of which is borne by an
assessment fund and is estimated to be:
16.1 million francs for the 8th year of operation
23.5 million francs for the 9th year of operation (in which year it
attains its maximum)
1.9 million francs for the 15th year of operation.
(2) complementary pensions provided by the State (250 francs in
cases of total incapacity), representing in total:
0.5 million francs for the 8th year of operation
8.9 million francs for the 24th year of operation (when it attains its
maximum)
2.9 million francs about the 45th year of operation;
(3) pension supplements paid by the State, during the transitional
period, to allow the minimum of 500 francs to be reached, the
total of which is estimated to be:
1.5 million francs for the 8th year of operation
5.1 million francs for the 14th year of operation (when it reaches its
maximum)
0.2 million francs at the end of 45 years.
In the subsequent investigations [3,- 5, 7] pre-invalidity was no longer
separated from permanent invalidity. It was assumed that the annual
20O
A C T U A R I A L T E C H N I Q U E AND FINANCIAL
ORGANISATION
crop of invalids would remain approximately constant. An annual levy
on the total amount of contributions would enable capital sums to be
set aside to cover all the invalidity pensions which emerged during the
year. Several estimates of this levy were made, and they all produced
the figure of approximately 2 per cent, of wages.
Experience
Scheme for commerce and industry
The invalidity pensions granted before 31 December 1935 involved
an expenditure for the General Guarantee Fund amounting to the following figures up to 31 December 1937: 41,056 thousand francs for pensions
in the strict sense; 1,272 thousand francs for children's supplements.
The average value of the pensions being paid at 31 December 1936
was 2,121.75 francs.
Agricultural scheme
The invalidity pensions granted before 31 December 1935 involved
an expenditure for the General Guarantee Fund amounting to the
following figures up to 31 December 1937: 979,000 francs for pensions
in the strict sense; 89,000 francs for children's supplements.
The average value of the pensions being paid at 31 December 1936
was 991 francs.
MEDICAL GARE OÏ INVALIDS
The 1930 Act, which was extended by the Decree of 30 June 1934
to cover agricultural occupations, and likewise the Decrees of 1935,
grant during a period of five years the medical benefit for insured
persons in receipt of an invalidity pension.
The Decrees of October 1935, with a view to the prevention of invalidity, establish a liaison between the sickness and invalidity insurance
schemes. When a sickness which has been certified for more than two
months foreshadows a future invalidity or appears to need special care,
such as a course of treatment in preventive or curative establishments
or a surgical operation, the sickness insurance fund notifies the regional
federation of sickness and maternity funds, or the invalidity insurance
fund to which it is attached. The special care may be provided by the
sickness insurance fund and repaid to it by the institution responsible
for the cost of invalidity insurance, without thereby occasioning a diminution of the expenses incurred under the heading of sickness insurance.
In the Statement on the financial and actuarial bases mentioned above
[2, p. 146], the cost of medical, pharmaceutical and special treatment for
temporary invalids is estimated, for 8,366,000 compulsorily insured
persons, at a figure which increases from 6.4 million francs in the third
year to a constant maximum of 22.6 million francs from the seventh
year onwards.
The portion of the contribution required to cover the cost of the care
of invalids was estimated in several subsequent estimates [3, 4, 7] at
0.1 per cent, of salary.
The expenditure of the General Guarantee Fund in respect of the
care of invalids before 31 December 1935 amounted at 31 December
1937. to:
38,307 thousand francs in the scheme for commerce and industry;
1,075 thousand francs in the agricultural scheme.
201
FRANCE
§ 5. — Old-Age Pensions
1930
ACT
In accordance with the 1930 Act, old-age pensions are governed by
the following clauses, which refer to the scheme for industry and
commerce as well as to that for agriculture.
Old-age insurance guarantees a pension on retirement at age 60.
However, the payment of the pension may, on the request of the insured
person, be anticipated from age 55 onwards or postponed.
The old-age pension is in principle constituted by the accumulation,
under the alienated capital system 1 or the repayable capital system at
the option of the insured person, of the fraction of contribution which
is credited to each individual account. This fraction is fixed as follows:
2 per cent, of basic wage for insured persons aged less than 30;
3.6 per cent, of basic wage for insured persons aged 30 or more 2.
Normally, every insured person who can prove, at the age of 60 or
up to the age of 65, at least 30 contribution years, each with a minimum
of 240 daily contributions, is entitled to an old-age pension at least
equal to 40 per cent, of the average basic wage as ascertained from the
compulsory contributions paid each year from- the- age of-16. The
pension is increased by a tenth for an insured person of either sex who
has brought up at least 3 children until the age of 16. When the father
and mother are both at the same time entitled to this 10 per cent.
increase, it is only granted once and is based on the higher of the two
pensions.
Insured persons aged more than 30 at the date of the Act's coming
into force have the benefit of " transitional " provisions. In the " transitional period " each insured person who, since the Act's coming into
force, has paid continuously 240 daily contributions each year, is entitled
to a pension at least equal to as many thirtieths of the normal pension as
he has contribution years to his credit, subject to a minimum pension
of 600 francs.
DECREES OF OCTOBER
1935
The Decree of 28 October 1935 made no essential modification of the
method of constituting old-age pensions in the non-agricultural scheme.
Nevertheless, the average wage on which is based the calculation of the
guaranteed minimum depends no longer upon the contributions paid
from the age of 16 but upon all contributions.. Moreover, contribution
years are defined not by the payment of a minimum of 240 daily contributions but by a deduction of at least 60 francs from the insured
person's wages.
1
When accumulation is effected under the alienated capital system, the
insured person may still, by express declaration, at the moment of entering
on his pension, give up part of his own pension in exchange for the right to
a reversionary
pension in favour of his wife.
2
In the agricultural scheme contributions payable by an insured person
aged more than 30 do not exceed 2 per cent, of basic wage, the additional
1.6 per cent, being paid by the State.
202
A C T U A R I A L T E C H N I Q U E AND FINANCIAL
ORGANISATION
In accordance, with the Decree of 30 October 1935 the constitution
of the old-age pensions in the agricultural scheme is governed by the
following regulations. Life annuities are constituted in individual
accounts by crediting therein a fraction of contribution fixed at
24 francs per annum for children under age 16;
72
„
„
„
„ women; and
120
„
„
„
„ men.
Minimum pensions are guaranteed under the following conditions:
When the individual account has been credited each year, for at
least 30 years, with contributions of a minimum of 100 francs
for men and 60 francs for women, the old-age pension shall not be
less than twenty times the average annual contribution allocated
to old-age insurance;
In the case of insured persons aged less than 30 on 1 July 1930, who
have until 31 December 1935 fulfilled the conditions required
by the 1930 Act, and whose individual account has been credited
each year from 1 January 1936 with contributions of at least
the minima mentioned above (100 francs for men and 60 francs
for women), the old-age pension shall be equal to as many thirtieths of the normal pension as there are annual payments
credited to the account, subject to a minimum pension of
600 francs.
DECREE OF 15 JUNE
1938
From 1 January 1939 onwards insured persons in agriculture are
divided into four classes and consequently the fractions of the contribution allocated to the individual old-age insurance accounts are fixed as
follows:
First class
24 francs a year;
Second class
72 ,, „ „
Third class
120 „ „ „
Fourth class
180 „ „ „
ESTIMATES MADE IN THE COURSE OF PREPARATORY INVESTIGATIONS
In the preparatory investigations attention was given to estimating
the expenditure involved in the payment of complementary old-age
pensions, that is to say the excess of the guaranteed fixed minima over
the pensions constituted by the contributions credited in individual
accounts.
The Report of the Senatorial Commission on Hygiene [3], dated 1925,
adopts as its bases on the one hand an average wage of 5,000 francs and
the average individual account credit of 175 francs (i.e. 3.5 per cent, of
the wage) and on the other hand a guaranteed minimum fixed in the
following mariner: after thirty contribution years, 40 per cent, of the
average wage over the last ten years; before thirty contribution years,
as many thirtieths of the normal pension as the insured person has
contribution years to his credit, subject to a minimum of 600
francs.
On these bases the complementary old-age pensions appeared to be
equal to a perpetuity of 282.5 million francs, with interest at 5 per
cent.
203
FRANCE
The second supplementary Report of the Senatorial Commission on
Hygiene [4, pp. 62 et seq.], dated 1926, amends the estimate of the same
charge, on the basis of a new age distribution of insured persons deduced
from the results of the 1921 Census, to a perpetuity of 218 millions (with
interest at 5 per cent.).
The Recommendation of the Senatorial Finance Commission of 1921
[5, pp. 120-122] adopts for workers earning less than 4,000 francs an
average wage of 2,607 francs, and for workers earning more than
4,000 francs an average wage of 6,149 francs. On the basis of a contribution of 4 per cent, of average wage to old-age insurance and assuming
the same method of constituting old-age pensions as that considered
above, the following annual figures represent the emerging cost of
complementary old-age pensions:
Year of operation
6th
7th
8th
9th
10th '
11th
12th
13th
14th
15th
16th
17th
18th
19th
20th
- 21st
22nd
23rd
24th
25th
. . . . .
Cost of
bringing
pensions
up to the
guaranteed
minima
(million francs)
218
245
271
295
319
341
362
380
396
410
421
429
435
438
439
437
433
426
416
401
Year of operation
26th
. 27th
28th
29th
30th
31st
32nd
33rd
34th
35th
36th
37th
38th
39th
40th
41st
42nd
43rd
44th
45th
Cost of
bringing
•pensions
up to the
guaranteed
minima
(million francs)
384
362
337
309
282
256
231
208
186
165
146
128
112
96
82
70
59
49
41
34
The Report of the Senatorial Commission on Hygiene [8, pp. 234-236],
dated 1929, estimates that the cost of guaranteeing minimum old-age
pensions to non-agricultural insured persons and agricultural insured
persons in the transitional period could be covered by a perpetuity of
513 million francs, on the assumption that the average wage is 8,000 francs
and the rate of interest 5 per cent. 1
The Recommendation of the Senatorial Finance Commission of
1930 [9, pp. 45-46] adopts as bases: an average daily wage of 21.9 francs
and an average number of contribution days in the year of 270. On
these bases the average cost per pension of guaranteeing the minimum
1
On the assumption that:
2 per cent, of the wages of insured persons aged at least 30,
3.50 „• „ „ „
..
„
„
„
„ over
are devoted to old-age insurance.
204
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
old-age pensions is estimated as follows for non-agricultural insured
persons :
Group
1935
1940
1945
1950
1955
1960
Francs
450
517
674
735 (maximum)
674
454
In addition it is estimated that for an insured person who has paid
contributions for 35 to 40 years the cost of the complementary old-age
penfcion is zero, the guaranteed minimum pension being in this case
provided entirely by the payments credited to the individual account.
§ 6. — Payments on Death
1930
ACT
In the scheme for commerce and industry the insurance against death
guarantees the payment of a lump sum to the dependants (surviving wife
or husband, or descendants, or in default of such to the relatives in the
ascending line who were dependent upon the insured person at the date
of his death) of every insured person who has been registered for at least
one year and who has completed 240 contribution days during the 12
months preceding death or 60 days during the last three months. This
lump sum is fixed at 20 per cent, of the average annual wage, but it
may not be less than 1,000 francs in the case of an insured person who has
contributed regularly nor more than two-thirds of the deceased person's
yearly wage. The lump sum payable at death is increased by 100 francs
for each child aged less than 16 left by the deceased.
The widow of an insured person having at least three children living,
legitimate, recognised or adopted, of less than thirteen years of age,
who were dependent on the insured person and who remain dependent
on her, is entitled to a temporary orphan's pension for each child of less
than thirteen years of age beginning with the second.
When the children of an insured man or woman have lost both parents,
each child under thirteen years of age is entitled to a temporary orphan's
pension.
The orphan's pension may not be less than 120 francs a year in respect
of each child.
The 1930 Act left the funds administering agricultural insurance
free to fix the amount of the payments to be made in case of death.
DECREES OF OCTOBER
1935
The Decree of 28 October 1935 made the following provisions governing
the payments on death in the non-agricultural insurance scheme.
In order to establish a right to death benefit the insured person must
have been registered for at least one year and contributions amounting
to at least 60 francs must have been deducted from his wages during the
last four quarters preceding that of death, if it is sudden, or of the
sickness or accident which resulted in death, if the deceased was an
insured person at the date of death.
205
FRANCE
The lump sum payable at death is no longer fixed at 20 per cent, of
the average wage but at 20 per cent, of the wage corresponding to the
joint contribution actually paid during the last four quarters preceding
that of death, if sudden, or of the sickness or accident which resulted
in death, if the deceased was an insured person at the date of death.
The guarantee of a minimum of 1,000 francs is abolished. The lumpsum payment at death is, as before, increased by 100 francs for each
child under age 16 left by the deceased.
The temporary orphan's pensions are granted under the same conditions as in the 1930 Act but they are increased to 240 francs a year for
each child.
In the agricultural scheme, by virtue of the Decree of 30 October 1935,
the dependants of the insured person receive on his death a lump sum
equal to ten times the amount of the contributions credited to his oldage insurance individual account during the last four quarters preceding
that of death, if it is sudden, or of the sickness or accident which resulted
in death, if the deceased was an insured person at the date of death.
The right to this payment is dependent upon the insured person's
old-age individual account having been credited, in respect of the abovenamed period, with:
at least 20 francs in the case of a child under 16,
at least 60 francs in the case of a woman, and
at least 100 francs in the case of a man.
DECREE OF 14 JUNE
1938
In the scheme for commerce and industry the right to an orphan's
pension is extended from the age of 13 to the age of 14 as from 1 July
1938.
DECREE OF 15 JUNE
1938
In the agricultural scheme the amount which must stand to the credit
of the individual old-age insurance account during the specified four
calendar quarters in order to entitle the insured person to a lump sum
at death is fixed as follows as from 1 January 1939:
not
,,
»
,,
less than 16 francs
,. ,. 48 „
.. .. 80 ,,
,, „ 100 ,,
for
„
,,
„
an insured person of the first
class;
,,
„
,, ,, „ second ,,
,,
,,
,, ,, ,, third
„
,,
,, „ „ fourth ,,
ESTIMATES MADE IN THE COURSE OF PREPARATORY
INVESTIGATIONS
The Statement on the financial and actuarial bases [2] already mentioned deals with the granting to the dependants of compulsorily insured
persons of a payment on death ranging from 150 to 1,500 francs, according to the wage class, conditional on the .insured person's having paid
in the course of the twelve months preceding death a minimum of
240 daily contributions. It estimates that the cost of these payments
would begin at 24,392 thousand francs for the first year and would
reach 46,772 thousand francs in the ultimate position (towards the
45th year).
The Senatorial Commission on Hygiene in its 1925 Report [3] values
206
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
at 0.3 per cent, of wages the fraction of contribution required to cover
the cost of insurance against death. This figure was obtained on the
following bases:
a lump sum payment on death fixed at 20 per cent, of the average
wage, subject to a guaranteed minimum of 1,000 francs;
an average wage of 5,000 francs.
The second supplementary Report [4] of the same Commission, dated
1926, by a new calculation based on the results of the 1921 Census
reduces this fraction from 0.3 to 0.2 per cent.
The Recommendation of the Senatorial Finance Commission [5],
dated 1927, gives the following estimates:
For the emerging cost of payments on death of an amount fixed at
20 per cent, of the average wage, an annual figure of about
73 million francs, representing 0.19 per cent, of the total wages;
For the complementary payments on death, to bring them up to
the guaranteed minima, an annual cost of about 19.8 million
francs, representing 0.05 per cent, of the total wages.
EXPERIENCE
Under the heading of compulsory insurance against death there have
been paid :
t
'
•
(a) In the scheme for commerce and industry [30, 31, 32]:
Thousands
of francs
6,824
28,980
31,580
32,557
31.901
23,230
1930-1931
1932
1933
1934
1935'
1936_
(b) In the agricultural scheme [30, 31, 32]:
1930-1931
1932
1933
1934
1935
1936
Thousands
of francs
187
1,397
1,893
1,750
1,943
1,096 1
* The two Decrees of 1935 involved a delay in the payment of lump sums in the event
of death.
In addition, the guarantee of the minimum benefit has~given rise,
under both schemes, to expenditure borne by the General Guarantee
Fund, and shown as follows in the accounts of that Fund [33]:
Thousands
of francs
1930-1931
1932 . . .
1933
1934
1935
1936
;
17
481
700
805
1,060
587 1
i The guarantee of a minimum was abolished as from 1 January 1936.
207
FRANCE
Furthermore, with the help of two partial analyses referring to documents of the years 1931 and 1932 respectively preliminary figures have
been obtained [30] for some of the essential statistical elements of
insurance against death. In particular the average amount of the lump
sum payable at death has been estimated at:
(1) In 1931, for
,, ,,
,,
(2) In 1932, for
,, ,,
,,
males,
females
males,
females
1,575 francs;
1,249 ,,
1,525 „
1,083 ,,
§ 7. — Family Maintenance Expenses
Under this head are dealt with the additions which fall to be made,
when the beneficiary has a dependent family, to the benefits applicable
to the various risks. These additions have already been mentioned
above; in this paragraph they are treated together, and likewise the
estimates which have been made concerning them.
1930
ACT
In the non-agricultural scheme, under the 1930 Act, the contributionmade by the social insurance scheme towards family maintenance
expenses includes, as regards the risks of invalidity, old-age and death:
(1) an increase of the invalidity pension by 100 francs a year for
each child aged less than 16 years;
(2) an increase of ttíe lump sum payment on death by 100 francs for
each child aged less than 16 years.
Moreover, the widow of an insured person having at least three children
living, legitimate, recognised or adopted, of less than 13 years of age,
who were dependent on the insured person and who remain dependent
on her, is entitled to a temporary orphan's pension for each child of
less than thirteen years of age beginning with the second. When the
children of an insured man or woman have lost both parents, each child
under thirteen years of age is entitled to a temporary orphan's pension.
The amount of the orphan's pension may not be less than 120 francs a
year in respect of each child entitled thereto.
DECREES OF OCTOBER
1935
Under the Decrees of October 1935, the provisions mentioned above
apply at the same time to the scheme for industry and commerce and
to the agricultural scheme, and the amount of the orphan's pension is
increased as from 1 January 1936 to 240 francs a year for each child
entitled thereto.
DECREE OF 14 JUNE
1938
From 1 July 1938 onwards, orphans' pensions are granted for one
year longer—that is, up to the age of 14 years.
208
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
ESTIMATES MADE IN THE COURSE OF PREPARATORY
.
INVESTIGATIONS
In the Statement on the Financial and Actuarial Bases [2] already
referred to, the family maintenance expenses to be paid by the State
are evaluated as follows:
(a) additions to the monthly allowances for pre-invalidity from
the 7th to the 66th month, inclusive (to the extent of 10 francs
a month per child in cases of total incapacity).
1,005 million francs in the 3rd year,
3,554 ,,
,, ,, ,, ultimate position;
(b) increase of the permanent invalidity pensions (beginning at
the 67th month inclusive) to the extent of 100 francs a year for
each child in cases of total incapacity:
389 million francs in the 7th year;
5,745 ,,
,, ,, „ 45th year;
(c) payments on death (100 francs per child):
3,343 million francs a year.
The Senatorial Commission on Hygiene in its Report, dated 1925,
estimates at 0.1 per cent, of wages the fraction of contribution required
to cover the cost of family maintenance expenses.
In the Recommendation of the Finance Commission of the Chamber
of Deputies [7], 1928 session, may be found detailed estimates of the
cost of family maintenance expenses:
(a) invalidity insurance 1 :
4 million francs the 1st year;
12 „
„
„ 6th year;
21 „
„
„ 11th year;
28 „
„
„ 16th year;
41 ,,
,, in the ultimate position ;
(b) insurance against death:
8.3 million francs a year;
(c) orphan's pensions 1 (90 francs a year for each child) :
an annual expenditure commencing at 4 million francs in the
3rd year'and increasing to a constant maximum of 16 million
francs reached in the 15th year.
EXPERIENCE
The expenditure resulting from the supplements for family responsibilities added to invalidity pensions, lump sums paid in the event of
1
The annual figures are reproduced in the Recommendation of the Senatorial Finance Commission for the year 1930. See Bibliography No. 9, p. 20.
209
FRANCE
death and orphans' pensions is shown as follows in the accounts of the
General Guarantee Fund 1:
Supplements Supplements
to invalidity to lump sums
paid on death
pensions
Supplements
to orphans'
pensions
Thousands of francs
1930-31
1931-32
1932-33
1933-34
1934-35
1935-36
1936-37
125
483
565
188
54
1,116
1,337
1,631
1,663
938
101
78
500
1,069
1,923
1,247
2,202
§ 8. — Special Insurance of Wives of Insured Men
1930
ACT
Under the 1930 Act, the wives, not being wage earners, of insured
men are admitted to a special scheme of insurance defined as is
indicated below, on condition that they apply within six months after
1 July 1930 or after the date of their marriage if they are aged less than
35 years, or after their exit from compulsory insurance. They are then
deemed to be compulsorily insured persons receiving a hypothetical
annual wage of 1,200 francs, subject to the following differences: their
contribution is fixed at 10 francs a month, they are not entitled to the
daily sickness benefit, they have no right to the guaranteed minimum
of 1,000 francs in case of death, the payment of the invalidity pension
operates only in cases of total incapacity to carry out household duties,
and half of the contribution is applied to constitute an old-age pension
in an individual account. The guaranteed minimum for the invalidity
or old-age pension in the transitional period is fixed at 250 francs and
is granted under the conditions regarding number and duration of
contributions which are applicable to insured men. Women insured
in this way who become widowed or divorced may continue to benefit
from this special insurance. They have the option of maintaining for
themselves and their children the rights to benefits in kind which they
previously enjoyed by virtue of their husband's insurance, in return for a
supplementary contribution independent of the number of children.
DECREE OF 28 OCTOBER
1935
The Decree of 28 October 1935 imposed the following modifications
on thé special insurance of wives of insured men:
the hypothetical annual wage was increased from 1,200 to 1,500 francs,
and
1
This Fund, the working of which will be considered later, took upon itself
to refund to the insurance institutions up to 1 April 1936 the supplements paid
by them to insured persons. The figures refer only to reimbursements by
the General Guarantee Fund, that is, to supplements in respect of pensions
which began to be paid not later than 1 April 1936.
14
•210
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
' the contribution was fixed at 8 per cent, of this hypothetical wage,
i.e. 30 francs a quarter.
ESTIMATES MADE IN THE COURSE OF PREPARATORY
INVESTIGATIONS
The Report of the Senatorial Commission on Hygiene [3, p. 205],
dated 1925, estimates the emerging cost of the special insurance for
wives of insured men at 2 million francs on account of family maintenance
expenses, and 14 million francs on account of old-age insurance, or a
total of 16 million francs, which should be provided for, to the extent
of a total of 7 million francs, by the payment of an annual contribution
of 20 francs.
The Recommendation of the Senatorial Finance Commission [5, p. 127]
for 1927 estimates the expenditure on the special insurance for wives
of insured men (additional payments for family maintenance, guaranteed minimum old-age pensions, and administration expenses) at a
total commencing at 4 million francs for the first year and attaining
16 millions the 6th year, 24 millions the 15th year, thereafter decreasing
until it reaches 5 millions towards the 45th year. This estimate has been
adhered t o in the investigations which followed1.
§ 9. — Maintenance of Insurance Rights of Persons suffering from
Sickness, Industrial Accident or Unemployment
1930
ACT
The rights of an insured person suffering from sickness are maintained
under the following conditions:
When the sickness has lasted more than fifteen days, the sickness
insurance fund pays for each working day from the sixteenth day, in
respect of the insured person to whom it is paying pecuniary benefit,
half the fraction of the contribution which must be assigned to old-age
insurance. This fraction is fixed according to the basic wage upon which
the daily pecuniary sick benefit is calculated.
An insured person who is involuntarily unemployed, who registers
at an employment exchange, who has completed a full year of uninterrupted membership of the social insurance scheme immediately before
the period of unemployment, and who fulfils the same conditions in
respect of contributions as are required for sickness insurance 2 , is
entitled for a maximum period of four months in every twelve months
to the payment of the joint contribution corresponding to his wage
class for the purpose of maintaining his rights.
1
Recommendation of the Finance Commission of the Chamber of Deputies,
1928 (Bibliography No. 7, p. 65) ; and Recommendation of the Senatorial Finance
Commission, dated 1930 (Bibliography No. 9, p. 20).
2
The insured person must have contributed for 60 days during the three
months or 240 days during the twelve months preceding the sickness—days
of sickness for which pecuniary benefit is paid being deemed to be contribution
days.
211
FRANGE
DECREE OF 28 OCTOBER
1935
With a view to maintaining the insured person's rights the following
payments are made on his behalf:
(1) by the sickness and maternity fund:
as from the beginning of the second month of sickness (or of
pathological pregnancy) a prescribed contribution for each
fortnight in which cash benefits are granted, whatever the
number of days for which benefit is paid. This prescribed
benefit contribution is equal to the amount of the daily
pecuniary benefit paid to the insured person, subject to a
minimum of 6 francs;
in cases of maternity a prescribed contribution of 24
francs ;
(2) by the employer, or the insurer substituted therefor, as from
the beginning of the second month of incapacity for work resulting
from an industrial accident, a prescribed monthly contribution
of 12 francs;
(3) by means of a levy on all contributions in case of involuntary
unemployment in respect of an insured person of French nationality registered at an employment exchange, a prescribed contribution of 30 francs for each quarter which includes at least
50 days of certified unemployment—but this contribution may
not be paid for more than two consecutive quarters in the same
civil year.
ESTIMATES MADE IN THE COURSE OF PREPARATORY
INVESTIGATIONS
Contributions for Insured Persons while Sick
The Statement on the Financial and Actuarial Bases, of 1923 [2, p. 146],
estimates that the payment of all the contributions for insurance against
old age and death, during days of sickness, will entail a constant expenditure of 33.6 million francs in respect of the compulsory insurance
scheme.
The Recommendation of the Senatorial Finance Commission, dated
1927 [5, pp. 92-93], estimates that the payment of the half-contribution
for old-age insurance of sick persons will be equivalent to a levy of
0.05 per cent, of wages. This estimate has not been modified in later
investigations.
Maintenance of the Rights of Insured Persons
while Unemployed
After the abandonment of the unemployment insurance scheme, the
inclusion of which had been considered in the Report of the Senatorial
Commission on Hygiene, 1925 [3], the cost of the measures needed to
maintain the rights of insured persons during involuntary unemployment
was estimated at the constant figure of 0.1 per cent, of the total wages
[5, 7].
212
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
EXPERIENCE
The payments made under the heading of half-contribution for old age
in respect of sick insured persons, in the scheme for commerce and industry, reached the following totals:
Period
Cases '
of maternity
Cases
of sickness
1,132
1,385
1,169
1,292
1,804
6,015
8,749
7,344
9,587
14,914
Cases
of maternity
Cases
of sickness
10
38
27
33
46
48
80
60
107
223
1930-31
1932 . . •
1933
1934
From 1.1.35 to 31.iu.36
and in the agricultural scheme:
Period
1930-31
1932 .
1933
1934
F r o m 1.1.35 to 31.lil.36
'
. . . .
The contributions in respect of unemployed insured persons could
not be paid except after a long delay. They appear in the accounts
of the General Guarantee Fund for the first time in 1934, and their
amounts have been shown as follows:
1934
1935
1936
•. .
7,823
11,718
9,949
§ 10. — Administration Expenses
1930
ACT
The 1930 Act provided that insurance funds could not allocate to
administration expenses a higher percentage than that which would
be fixed, for the various funds, by a Decree issued on the recommendation of the Minister of Labour, and which would reach at its maximum
3.5 per cent: of the contributions received. Furthermore, it made
provision for resources to meet the cost of operating the various services
and funds in connection with the application of the Act, within the
maximum limit of 5 per cent, of the total amount of all contributions
and grants in aid.
213
FRANCE
DECREES OF OCTOBER
1935
As from 1 January 1936, the payment of administration expenses
is made directly by a deduction from the investment revenues in the
case of the old-age and death funds or the invalidity, old-age and
death funds and of the regional federations (Unions Régionales) of
sickness and maternity funds. These deductions may not exceed maxima
fixed by order of the Minister of Labour in such a manner that the
total administration expenses of the funds and the regional federations
of sickness and maternity funds cannot exceed, on a yearly average,
5 per cent, of the total resources provided for the operation of the
social insurance scheme.
For the years 1937 and 1938 the administrative expenses of the social
insurance funds were subject to the following rules.
Old-Age and Death Funds or Invalidity, Old-Age and Death Funds
for Commerce and Industry
The maximum for the administrative expenses of these funds was
fixed at the aggregate of the following four amounts:
(Í) an amount calculated on the basis of the contributions actually
credited to the fund during the year in respect of old-age and .
death insurance at the rate of:
6 per cent, of the contributions credited below 16 millions;
4.5 per cent, of the contributions credited between 16 and
32 millions;
2 per cent, of the contributions credited over 32 millions;
(2) an amount equal to 8 francs per pensioner;
(3) an amount equal to 6 per cent, of the contributions actually
credited to the fund during the year in respect of invalidity
insurance;
(4) an amount equal to 5 francs per insured person or per pensioner
who during the year requested the transfer of his contribution
from the repayable capital system to the alienated capital
system.
Regional Federations for Commerce and Industry
The maximum for the administrative expenses of the Regional
Federations was fixed at the aggregate of the following two
amounts :
(1) an amount equal to 6 per cent, of the contributions actually
credited to the Federation during the year;
(2) an amount equal to 8 francs per pensioner.
214
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
Compulsory Insurance Sections of Independent Agricultural Funds and
Special Agricultural Insurance Section of the National Old-Age
Pension Fund
The maximum for the administrative expenses of these sections was
fixed at the aggregate of the following four amounts:
(1) an amount equal to 6.25 per cent, of the contributions and increase
in contributions actually credited to the fund during the year
in respect of old-age and death insurance;
(2) an amount equal to 8 francs per pensioner;
(3) an amount equal to 6.25 per cent, of the additional contributions
actually credited to the fund during the year in respect of invalidity insurance;
(4) an amount equal to 5 francs per insured person or per pensioner
who during the year requested the transfer of his contribution
from the repayable capital system to the alienated capital system.
National Reinsurance Federations in the Agricultural Scheme
The maximum for the administrative expenses of these federations
was fixed at the aggregate of the following two amounts :
1.
2.
an amount equal to 6 per cent, of the fraction of the contributions
and State grants received during the year either in respect of
reinsurance or in respect of invalidity insurance;
an amount equal to 8 francs per pensioner.
When the administrative expenses of any of the bodies mentioned
above exceed the maximum in the course of any given year the difference
is included in the administrative budget and must be worked off in
subsequent budgets.
ESTIMATES MADE IN THE COURSE OF PREPARATORY INVESTIGATIONS
The 1923 estimates [38] relate on the one hand to the allowances
and payments assigned to the insurance funds and on the other hand to
the administration expenses of the offices. The first give a total of
88 million francs for the first year and 92 millions in the ultimate position,
i.e. an average of about 11 francs per insured person. The second produce a constant total of 65 million francs.
The Report of the Senatorial Commission on Hygiene [3, p. 195] dated
1925 arrives at an annual expenditure of 225 million francs which could
be covered by a levy of 0.5 per cent, on wages. This figure is reduced
to 191.7 millions in the Recommendation of the Senatorial Finance
Commission [5, p. 129], of 1927. The Recommendation of the same
Commission [9, p . 44], dated 1930, rounds up this figure to 200 millions!
EXPERIENCE
Until 1 January 1936 insurance funds received their administration
allowances from a central organisation (the General Guarantee Fund),
whose functioning will be examined below.-
215
FRANCE
The total amount of the administration allowances assigned to each
risk is shown by the following table (in thousands of francs) :
Year
1930-1931
Medical
care of
invalids
Old-age
insurance
14
8,151
6,533
12,264
15,543
. . .
1935
Invalidity
insurance
1,836
5,031
45,513
Liquidation
of workers'
and peasants'
pensions
scheme
253
6,532
4,436
4,754
l
i Separate ligures for the different items not available.
To the administration expenses mentioned above there must be
added the cost of administration of the General Guarantee Fund, the
administrative services and, finally, the repayment of postage in respect
of franked correspondence. Under these three headings are entered the
following amounts of expenditure, in thousands of francs :
Year
1929
1930
1931
1932
1933
1934
1935
1936
1937
General
Guarantee
Fund
393
1,538
2,910
3,312
3,307
3,689
4,224
3,988
4,105
Administrative Repayment
services
to the
of social
Post Office
insurance
Administration
81,481
20,000
[ 148,662
47,850
75,779
71,841
78,129
74,968
89,185
24,000
24,000
20,000
24,100
24,100
CHAPTER III
FINANCIAL SYSTEM
The 1928 Act, like the preparatory investigations which preceded it,
established a single financial system for the whole insurance scheme.
In the 1930 Act, on the contrary, there appears a distinction between
the insurance of workers in commerce and industry and that of agricultural workers. This distinction has been maintained, and it is impossible
to confuse the two financial systems, which were instituted for the
commerce and industry scheme by the Decree of 28 October 1935,
and for the agricultural scheme by the Decree of 30 October 1935
respectively. With regard to the insurance against invalidity—which
is analysed in detail in § 3—it must be noted that the financial mechanism provided for meeting expenditure has not yet been put into
operation: only provisional measures have been taken, which have
allowed the postponement of a permanent solution to the problem.
§ 1. — Essential Features of the Financial System
With a view to facilitating the reading of this chapter and at the same
time summarising the financial organisation on the one hand of the
scheme for commerce and industry and on the other hand of the agricultural scheme, the various insurance institutions will be enumerated,
with the indication of the principal roles which have successively
been assigned to them. The institutions created by the 1930 Act, the
modifications which they have undergone and the forms in which they
exist as a result of the Decrees of October 1935 will be considered for
each scheme separately.
SCHEME FOR COMMERCE AND INDUSTRY
The assessment funds instituted by the 1930 Act to administer the
so-called assessment risks (sickness, maternity, death and care of
invalids) became, as from 1 January 1936, old-age and death funds or
sickness and maternity funds.
The accumulation funds, on which, in accordance with the 1930 Act,
depend the insurances against old age and invalidity, have been transformed by the Decree of 28 October 1935, into invalidity, old-age and
death funds and they have been charged with the administration of
orphans' pensions.
The reinsurance federations of the 1930 Act, having for their object
on the one hand the reinsurance of the risks of sickness, maternity and
FRANCE
217
death and on the other hand the equalisation of the costs of the medical
care of invalids, have been replaced, pursuant to the Decree of 28 October
1935, by regional federations of sickness and maternity funds.
These have as their essential functions:
(1) the equalisation of the risks of sickness and maternity, and the
guarantee of the liability they involve;
(2) participation in the supervision of sick persons and a share in the
work of social hygiene and prevention;
(3) the provision of medical treatment for invalids and the payment
of invalidity pensions during the first five years from the date
of entry on pension.
The 1930 Act created within the central institution (General Guarantee Fund) two funds between which were shared the financial operations in respect of insured persons in commerce and industry: the
Augmentation and Joint Business Fund and the Guarantee and Equalisation Fund.
The Decree of 28 October 1935 defines the operation of the General
Guarantee Fund as that of an Augmentation Fund and of a Guarantee
Fund, which carry on respectively the work of the two pre-existing
Funds.
The invalidity risk, which up to 1 April 1934 had been provisionally
made chargeable to the Augmentation and Joint Business Fund, was
as from that date transferred to the Guarantee and Equalisation Fund.
As from 1 January 1936 the cost of the invalidity risk falls partly on the
regional federations, as regards the medical care of invalids and the
payment of invalidity pensions during five years from the date of entering
on pension, and partly on the invalidity, old-age and death funds, as
regards the payment of invalidity pensions after 5 years until age 60.
AGRICULTURAL SCHEME
Mutual benefit societies or branches of such societies composed exclusively of insured persons in agricultural occupations, which undertook,
under the 1930 Act, insurance against sickness, maternity and death,
have been preserved by the Decree of 30 October 1935, but their
operations have been limited to sickness and maternity.
The independent old-age insurance funds of the 1930 Act continue to
operate, but they extend their functions to cover invalidity and death:
the National OlcUAge Pension Fund continues to take the place of the
independent funds as regards insured persons who are not affiliated
thereto.
The agricultural reinsurance federations, which under the 1930 Act
reinsured the risks of sickness and maternity, have been replaced, under
the Decree of 30 October 1935, by the National Reinsurance Federations
which have as their objects:
(1) reinsurance of the risks of sickness and maternity;
(2) participation in the supervision of sick persons and a share in
the work of social hygiene and prevention ;
(3) the provision of medical treatment for invalids and the payment
of invalidity pensions during the first five years after entry on
pension.
218
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
The special agricultural fund and the agricultural relief fund which,
under the 1930 Act, were charged respectively with the payment of
complementary old-age pensions and with the guarantee of the solvency
of the funds covering the risks of sickness and maternity, were abolished
by the Decree of 30 October 1935. The two funds of the General
Guarantee Fund mentioned above play a part in the administration of
the agricultural scheme as well as in that for commerce and industry.
With particular reference to the technical structure on which the
financial system rests, a synthetic, outline will now be given of the
principal mechanisms which play a part in the operation of both the
insurance scheme for commerce and industry and the agricultural
scheme. The description is confined to the features which are absolutely
indispensable :
(1) An " assessment ", which provides for the annual expenditure
relating to certain risks by ¡means of a levy on the contributions of the same year. These risks, which at first included sickness, maternity, death, and medical care of. invalids
have been limited as from 1 January 1936 to sickness and maternity.
(2) An " accumulation " of sums entered in the individual account
of each insured person, with the object of constituting a life
annuity for him.
(3) An " assessment to meet the capital value of pensions ", according
to which the present values of the invalidity pensions which
become current during the year aré debited each year.
(4) A system of central funds in which a distinction is made (as
indicated above) between:
(a) " federations ", sometimes national, sometimes regional,
(b) a central institution: the General Guarantee Fund.
§ 2. — Apportionment of the Total Contribution
In this section will be examined the apportionment in accordance
with which the total contribution is divided between the various risks
and also between the various institutions. A certain number of the
figures which will be reproduced have already been mentioned in the
preceding chapter.
It has seemed expedient, nevertheless, having
regard to their importance, to bring them together in a special paragraph
before entering into a detailed study of the financial system.
ACCORDING TO THE PREPARATORY INVESTIGATIONS
The coefficients of apportionment (including their sum, which defines
the total contribution) have been the subject of a very important part
of the preparatory investigations. In the table below are reproduced
the principal apportionment scales which have been successively taken
into consideration for the risks of invalidity, old age and death., They
include most of the figures which have resulted from the estimates of
expenditure calculated separately for each risk.
219
FRANCE
TABLE X I I . — APPORTIONMENT OF TOTAL CONTRIBUTION AMONG
I N V A L I D I T Y , OLD-AGE AND DEATH R I S K S : P R E P A R A T O R Y I N V E S T I G A T I O N S
(as a percentage of basic wage)
Finance
Senatorial
Commission
SenaFinance
of
Chamber
torial
Commission
of Deputies
Health 1927 Recom1928
RecomCommendation [5] mendation
[7]
mission
1925 [3]
Report Before After Before After
age 30 age 30 age 30 age 30
^
^
y
{ Medicare
f Accumulation^ for lifeOld-Age i
annuity
[ Guaranteed m i n i m a . .
f L u m p sum p r o p o r t i o n a t e t o
D e a t h •!
basic wage
1 Guaranteed minima . . .
Half contribution for old-age insurance of sick persons
Family maintenance
Maintenance of rights of unemployed
Administrative expenses
2.00
0.10
2.23
0.20
1.81
0.16
2.00
0.10
2.00
0.10
3.50
2.00
0.66
4.00
2.00
1.25
4.00
0.21
0.17
0.19
0.05
0.19
0.05
0.05
0.05
0.10
0.05
0.04
0.05
0.10
0.05
0.05
0.05
0.10
0.05
0.05
0.05
0.10
0.05
0.30
0.10
0.10
0.50
SINCE THE COMING INTO FORCE OF THE 1930
ACT
The apportionment coefficients prescribed by the 1930 Act are given
first and then the more complete tables which have resulted from the
Decrees provided for in the Act.
Insurance for Commerce and Industry
Under the provisions of the 1930 Act, the total contribution is fixed
at 8 per cent, of the basic wage and it is divided into two equal parts
allocated, subject to certain deductions, one to provide for the risk of
old age, the other to guarantee the risks of sickness, maternity and
death and the medical care of invalids. Out of the amount allocated
to the provision for old age, there is assigned to the constitution of
an old-age pension in the accounts of individuals a sum fixed each year
by decree, which may not be less than 3.6 per cent, of the basic wage
for insured persons aged 30 years or more and 2 per cent, of the basic
wage for insured persons aged less than 30 years. The difference between
the total part allocated to the provision for old age and the sum fixed by
decree is paid to the General Guarantee Fund. Out of the total of the
contributions allocated to the primary funds in respect of the insurance
against sickness, maternity and death and medical care of invalids,
there is retained, under the heading of guarantee and equalisation,
5 per cent, for the benefit of " Reinsurance Federations " and 5 per cent.
for the benefit of the General Guarantee Fund (Guarantee and Equalisation Fund). A payment of 2 per mille of all contributions received by
the insurance funds is deducted for the benefit of the Guarantee and
220
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Equalisation Fund (General Guarantee Fund), but the rate of this
deduction may be decreased by decree in the event of the assets of
the Guarantee and Equalisation Fund reaching 100 million francs.
The so-called " accumulation contribution " has always been apportioned as follows (as a percentage of the basic wage):
-
Before
age 30
After
age 30
2.00
3.60
1.60
0.40
Accumulation Fund
f Augmentation and Joint
General
J Business Fund
. . .
Guarantee F u n d 1 Guarantee and Equalisa-
. 0.40
As from 1 August 1934, the fraction (0.4 per cent, of the basic wage)
deducted for the benefit of the Guarantee and Equalisation Fund from
the contributions of insured persons aged less than 30 years has been
assigned by priority to the expenses of the insurance against invalidity.
As regards the insurance against death, the medical care of invalids
and the General Guarantee Fund, the following apportionment scales
have been successively put into force, by the decrees provided for in
the Act:
Decree of Decree of
5.7.1930
21.7.1931
(years
(year
1932)
1930-1931)
Decrees of
12.4.1931 Decree of
and of
3.5.1935
3.1.1934
(year
(years
1935)
1933-1934)
(Pe rcentage of the basic w age)
Care of invalids :
Assessment Fund
. . . .
Reinsurance Federation . .
-
~
0.120
0.008
—
Insurance against death:
Assessment Fund
. . . .
Reinsurance Federation. .
0.1684
0.0092
0.1684
0.0092
0.120
0.008
0.100
0.008
0.2948
0.280
0.440 !
0.0800
0.080
0.080
General Guarantee F u n d :
Reinsurance and guaranteed
Maintenance of rights of *
unemployed insured persons
lo.2988J
i Including cost of administration and expenditure relating to family maintenance.
The Decree of 28 October 1935 confines itself, on the one hand, to
fixing at 8 per cent, the ratio of the total contribution to the wage 1 ,
and, on the other hand, to stipulating the minimum fractions of this
contribution which should be assigned to the individual accounts:
45 per cent, for insured persons aged 30 years or more and 25 per cent.
1
This percentage was reduced to 1 per cent, as an exceptional measure
for the year 1936.
221
FRANCE
for insured persons aged less than 30 years. The remainder of the
apportionment is determined by order. The coefficients reproducep
below determine, in thousandths of the total contribution, the apportionments applicable to contributions in the years 1936, 1937 and 1938
respectively. .
Year 1937
Year 1936
Insured
persons
aged
less than
30 years
Accumulation Fund:
Individual account. .
Death and orphans'
pensions
Invalidity
General Guarantee Fund :
Complementary
oldage pensions. . . .
Insured' Insured
persons persons
aged
aged
30 years less than
or more 30 years
Year 1938
Insured
persons
aged
30 years
or more
Insured
persons
aged
less than
30 years
Insured
persons
aged
30 years
or more
250
450
250
450
250
450
15
15
12
13
12
13
20
30
20
30
250
50
250
50
250
50
Regional Federations :
Invalidity and care of
invalids
Guarantee and equalisation
-.
5
5
41
41
69
69
40
40
34
34
31
31
Assessment Fund. . .
440
440
400
400
350
350
1,000
1,000
1,000
1,000
1,000
1,000
Agricultural Insurance
The apportionment of the contribution applicable to an insured person
employed in agriculture is determined partially by the rules which
define this contribution separately for old-age insurance and for insurance
against sickness, maternity and death. A certain number of deductions
are provided for, but they affect, not the contributions, but only the
grants in aid assigned to the agricultural insurance scheme as an increase
of contributions.
It will be seen from the figures given above that under the Decree
of 30 October 1935 the fraction of the total contribution apportioned
-to the individual old-age insurance account was fixed at:
Via for children under 16 years of age;
women ;
men.
6
/ie for
10
/2o for
The fraction of the additional contribution (paid by the State)
apportioned to the risks of invalidity and death was distributed as
follows:
during 1936: 2.60 francs a month to the National Reinsurance Federation and 0.40 franc a month to the Independent Invalidity,
222
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Old-Age and Death Fund or to the National Old-Age Pensions
Fund (for the risk of death);
during 1937 and 1938: 2 francs a month to the National Reinsurance
Federation and 1 franc a month to the other fund (0.20 for
invalidity and 0.80 for death).
It follows from the figures given above that from 1 January 1939
onwards, under the Decree of 15 June 1938, the fraction of the total
contribution apportioned to the individual old-age insurance account
will be:
2
/12 for insured persons of the first class ;
Vie >.
..
»
.. second „
/ao ,.
..
»
.. t h i r d
..
"/so ,.
..
..
», fourth „
. The remainder of the contribution is apportioned jointly to the risks
of sickness, maternity and invalidity. The distribution of this second
fraction is determined solely by Interdepartmental Order. The fractions
of the additional contribution paid by the State which are allocated
to the risks of sickness, maternity and invalidity are also determined
by coefficients laid down by Interdepartmental Order.
10
§ 3 . — Financial Equilibrium of Invalidity Insurance
INTRODUCTION
Since the coming into force of the scheme insurance against invalidity
has undergone numerous modifications, which have largely disturbed
the financial organisation which had been provided for it.
The inconsiderable expenditure during the first years of operation
was covered by exceptional receipts, but the normal method of covering
the risk of invalidity has not been determined precisely.
The total contribution had been fixed by the 1928 Act at 10 per cent.
of the amount of wages, on the assumption, in conformity with the
results obtained in the preparatory investigations, that a fraction of
2 per cent., of the amount of wages would be necessary to cover the cost
of invalidity pensions.
The legislative provisions which were subsequently adopted are no
longer common to insured persons in commerce and industry and to
insured persons in agriculture.
As regards insured persons in commerce and industry,' the 1930 Act,
in principle, does not deviate from the conception contained in the
1928 Act; nevertheless, the payments assigned to the insurance against
invalidity have been deferred:
until 1 April 1934, as regards a first fraction of 1 per cent, of the basic
wage;
until 1 April 1940, as regards a further fraction of 1 per cent, of the
basic wage.
Consequently, the expenditure on invalidity insurance has been provisionally charged to the Augmentation and Joint Business Fund. The
FRANCE
223
Finance Act of 28 February 1934 deferred the payment of the first
fraction of 1 per cent, of the basic wage which was due to commence
on 1 April 1934, and at the same time transferred the charge in respect of
the invalidity risk from the Augmentation and Joint Business Fund to
the Guarantee and Equalisation Fund.
As from 1 January 1936, in pursuance of the Decree of 28 October
1935, the cost of invalidity insurance is taken over: (1) by the regional
federations as regards the care of invalids and the payment of pensions
during the first five years after entering on pension; (2) by the invalidity,
old-age and death funds as regards the cost of pensions from the end
of the fifth year of pension until age 60.
The 1930 Act entirely excluded from invalidity insurance all insured
persons engaged in agricultural occupations. The Decree of 30 June
1934 extended invalidity insurance to agriculture and placed the
resulting cost on the Agricultural Relief Fund.
The Decree of 30 October 1935 divided the expenditure on invalidity between the National Reinsurance Federations (as regards the
care of invalids and the payment of pensions during the first five years)
and the independent invalidity, old-age and death insurance funds (as
regards the cost of pensions after five years).
PREPARATORY INVESTIGATIONS
The choice of the most suitable financial mechanism to use for
invalidity insurance has been considered repeatedly during the course
of the preparatory investigations and on this subject various proposals
were put forward.
First of all a distinction was made between pre-invalidity, which was
considered to be for five years a prolongation of sickness (after the end
of the sixth month), and permanent invalidity which commenced at the
end of the period of sixty-six months covered by sickness and then
pre-invalidity. According to this conception, the risk of pre-invalidity
was assimilated to the risk of sickness and should, therefore, like the
latter, be amenable to an assessment scheme. Permanent invalidity,
on the contrary, was regarded as a risk involving long-dated obligations,
which should on this account be treated as of the same character as
old-age insurance. From the commencement of pre-invalidity an individual invalidity insurance account should be substituted for the individual old-age insurance account and it should receive the actuarial
reserve credited to the latter. In cases of partial incapacity for work
the two individual accounts existed side by side. If the insured person
regained his health the invalidity account disappeared in favour of the
old-age account which was re-established. To the annuities produced
by the accumulation of the contributions credited to the individual
accounts had to be added, in certain cases and under well-defined conditions, complementary pensions the total amount of which would be
obtained each year from a guarantee fund. Finally, provision was made
for State contributions for the benefit of temporary as well as of permanent invalids.
The subsequent investigations brought forward a different technical
conception: pre-invalidity was no longer separated from permanent
invalidity and together they had to cover their expenditure—separate
from that of the risk of old age—by means of a levy on contributions.
It was assumed that the annual crop of invalids would remain approximately constant and consequently recourse was had to the system,
224
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
called " assessment to meet capital value of pensions ", which was previously adopted in France for life annuities in respect of persons suffering
from industrial accidents. An annual levy on the total contribution
income was used for the purpose of setting up capital sums representing
the actuarial reserve for all invalidity pensions which emerged during
the year. Several calculations were made in order to determine this
levy; they all resulted in approximately [3, 5, 7] 2 per cent, of
wages.
As regards medical care of invalids, the preparatory investigations all
produced an estimate [3, 5, 7] of the cost corresponding to 0.1 per cent.
of the total amount of wages.
INSURANCE FOR COMMERCE AND INDUSTRY
1930 Act
According to the second conception considered in the preparatory
investigations, invalidity pensions constitute a risk distinct from that
of old age. For the purpose of establishing the financial solvency of the
insurance of this risk the Act provides two increases in contributions
dating, the first from 1 April 1934, and the second from 1 April 1940,
both, being fixed at one-eighth of the initial contribution, or one per
cent, of the basic wage.
As from 1 April 1934, the actuarial reserve for the invalidity pensions granted each year is to be provided in a special account, by means
of a levy on contributions, the percentage to be fixed by decree each year.
As a provisional measure, until 1 April 1934 the expenditure due to
the payment of invalidity pensions is borne by the General Guarantee
Fund (Augmentation and Joint Business Fund). The same applies to
the cost of the medical care of invalids, subject to a counterbalancing
payment made by the Reinsurance Federations.
The actuarial reserves are calculated by means of a table constructed for an annuity payable until cessation by reason of death or
return to health, receivable quarterly in arrear with proportion to date
of death. This table is based on the table of cessation of invalidity
pensions mentioned in Chapter I, with interest at a rate fixed according
to the following rules:
(1) if the rate of interest applicable to the calculation of reserves
for old-age insurance * is greater than 5 per cent., it is reduced
by 1.40 per cent.;
(2) if the rate of interest applicable to the calculation of reserves for
old-age insurance is equal to or less than 5 per cent., recourse is
had to the following table:
Rate of interest
applicable to the
calculation of
actuarial reserves
for old-age
insurance (per cent.)
5.00
4.80
4.60
4.40
4.20
1
See below, p p . 228-229.
Rate of interest
applicable to the
calculation of
present values
of invalidity
pensions (per cent.)
3.60
3.40
3.40
3.20
3.00
FRANCE
225
(3) if the rate of interest applicable to the calculation of reserves for
old-age insurance is equal to or less than 4 per cent, it is reduced
by 1 per cent.
From the total of the present values of pensions thus calculated is
deducted the actuarial reserve corresponding to the old-age pensions
which appear in the individual accounts of the invalids.
In the case of a person in receipt of an invalidity pension, the life
annuity under the old-age insurance system is payable either normally
as from age 60, or for a reduced amount as from the definitive grant of
the invalidity pension in case of permanent and total incapacity for
work.
The increase by one-eighth of the contributions, specified by the 1930
Act as from 1 April 1934, has been deferred, and at the same time the
invalidity risk has been provisionally transferred, within the General
Guarantee Fund, from the Augmentation and Joint Business Fund to
the Guarantee and Equalisation Fund. As from 1 April 1934, and until
January 1937, the latter fund repays to the old-age insurance funds the
total amount of the invalidity pensions payable by them. To these
repayments was assigned as a first charge the levy made, for the benefit
of the Guarantee and Equalisation Fund, on the old-age insurance
contributions of persons who have not attained age 30 (0.4 per cent, of
the basic wage). The cost of the medical care of invalids was also
charged to the Guarantee and Equalisation Fund.
Decree of 28 October 1935
Since 1 January 1936 a distinction is made, as in the first preparatory
investigations, between the first five years of invalidity and the subsequent years. During the first five years of invalidity the cost of
pensions, and also the cost of the medical care of invalids, falls on the
regional federations of sickness and maternity funds. At the expiration
of the fifth year of invalidity, the invalidity, old-age and death insurance
fund sets up, by means of its annual resources, the actuarial reserve
corresponding to each invalidity pension. The invalidity pension ceases
at age 60. As from this age it is replaced, in accordance with the mechanism called " supplementary insurance ", by the old-age pension to
which the insured person is entitled by reason, on the one hand, of the
payments made by his successive employers and, on the other hand,
of the contributions paid each year to the old-age insurance scheme
in their stead by the invalidity fund or by the regional federation of
sickness and maternity funds. The contributions paid to the old-age
insurance scheme by the invalidity fund or by the regional federation
of sickness and maternity funds are fixed according to the average
wage1 which served as basis for the calculation of the invalidity pension ; they are apportioned between the individual old-age insurance
acpount of the beneficiary and the Augmentation Fund in accordance
with the rules applicable to ordinary contributions. If the insured person
is still, at the age of 60, in receipt of an invalidity pension, the General
Guarantee Fund makes up to the amount of that pension the annuity
entered (calculated under the alienated capital system) in his individual
old-age insurance account. Each year an Order fixes the fraction of
contribution which should be assigned to cover invalidity pensions
in accordance with tables constructed by taking into account the pro1
According to a scale prescribed by Orders of 20 June 1936 and 27 April
1937.
15
x
226
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
bability of becoming an invalid at the various ages and the mortality of
invalid persons.
The rate of interest on which is based the calculation of the capital
value of invalidity pensions is equal to 80 per cent, of the rate of interest
applicable to the calculation of the actuarial reserves for old-age insurance
for the same financial year *.
For the purpose of covering the cost of the invalidity risk the following
resources have been allocated:
(a) to be assigned to the Regional Federations as exceptional items :
a payment of 400 million francs from the General Guarantee Fund;
an exceptional levy on the surplus receipts on 31 December 1935
in the assessment funds 2 ;
the allocation of a fraction, equal to not more than '/ 12 , of the
assets of the Reinsurance Federations at 31 December 1935.
(b) to be assigned to the Regional Federations as normal items:
an annual levy fixed at 20 per cent, of the surplus receipts of
the sickness-maternity funds;
a contingent levy on the total contributions (fixed for the year
1936 at 5
41
r
/IOOOJ for the year 1937 at /iooo and f ° the year 1938
69
at /iooo of the total contributions).
(c) to be assigned to the invalidity, old-age and death funds :
one-half of the profits realised each year by these funds under
the heading of old age and death, when the previous balancesheet shows a surplus.
It is provided, moreover, that a fraction of contribution shall be
assigned, by Order each year, to cover the cost of invalidity pensions:
it was fixed for 1937 at 13/iooo> and for 1938 at 30/iooo of the total
contributions.
AGRICULTURAL
INSURANCE
Decree of 30 June 1934
The invalidity insurance system has been extended, with retrospective
effect, to wage earners in agriculture and forestry.
The invalidity pensions in the agricultural scheme, as well as the cost
of the medical care of invalids, are charged to the Agricultural Relief
Fund. This Fund receives a levy of 1 franc a month on the addition
which the State makes, under the 1930 Act, to each contribution of
agricultural insured persons in respect of the risks of sickness, maternity
and death. This Fund also receives, in capital and interest, the balance
of the proceeds of the sale of stamps for workers' and peasants' pensions
to the maximum amount of 10 million francs.
Decree of 30 October 1935
As for commerce and industry invalidity insurance is treated
as supplementary to old-age insurance: the invalidity pension is
replaced at the age of 60 by an old-age pension. During the first five
1
2
See below, p. 229.
The amount of which was fixed at 300 millions by the Decree of 7 October
.1936.
227
FRANCE
years of invalidity, the cost of pensions and also the cost of the medical
care of beneficiaries fall on the National Reinsurance Federations. The
independent invalidity, old-age and death insurance funds set up, at
the end of the fifth year from the date of entering on invalidity pension,
the actuarial reserve for this pension.
The resources specified for covering the cost of invalidity insurance,
for the National Reinsurance Federations as well as for the independent
invalidity, old-age and death insurance funds, are included in the levies,
fixed by Decree, on the additional contributions payable by the State 1 .
Decree of 15 June 1938
This Decree provides that from 1 January 1939 onwards that fraction
of the contribution which is not allocated to the individual old-age
insurance account shall be distributed over the risks of sickness, maternity
and invalidity. For the first time a fraction of the contribution may be
used for the invalidity risk.
ESTIMATE OF THE COST OF INVALIDITY PENSIONS
The Committee of Experts, appointed in 1935, valued, on the bases
indicated above 2, the annual emerging cost of the capital reserves
required to cover the temporary invalidity pensions and of the payments
resulting from the operation of the supplementary insurance (payment
of an old-age contribution on behalf of invalids).
It produced the following results [30]:
0.08 per cent, of the wages of insured contributors for the 1st year
0.27
1.02
1.22
1.28
1.33
„Î) „ti
„it
•>•}
„
„1
„Jï
„ÏÏ
»
11
»)
Í>
11
Í
)»
11
1
„
1)
)J
)i
)1
1
Î1
13
1
11
))
11
51
1
11
lì
i
„
„
5th
„
„ „ 10th „
» » 15th „
„ „ 20th „
from the beginning of
the 25th year.
At the same time it estimated that the cost of the medical care of
invalids would normally be equivalent to 0.22 per cent, of the wages
of insured contributors.
§ 4. — Financial Equilibrium of Old-Age Insurance
CONSTITUTION OF OLD-AGE PENSIONS
Preparatory Investigations
In the first Bill [1], presented by the Government in 1921, the fractional contributions which were to be capitalised in individual accounts
differed as between different wage classes [2]. Subsequently this idea
was completely abandoned. The Senatorial Commission on Hygiene
in its 1925 Report [3] took into consideration only one percentage, which
it fixed at 3.5 per cent, of wages; later investigations [5, 7] introduced
1
2
See above, pp. 194-195.
Pages 200-201.
228
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
two percentages, applicable according to the age of the insured person
at the moment of payment:
2 per cent, if this age is less than 30 years, and
4 „ „ ,, „ „ ,, more „
Act of 1930
An old-age annuity is constituted in favour of each insured person,
in an account opened in his name, by the accumulation of a fractional
contribution fixed by Decree but which, according to the Act, may not
be less than 2 per cent, of the basic wage when the insured person has
not attained age 30 and not less than 3.6 per cent, of the basic wage in
the contrary case. In fact the percentages remained constantly fixed
at their respective lower limit: 2 per cent, and 3.60 per cent.
The accumulation operations are carried out by means of old-age
insurance scales, in accordance with the following provisions:
The old-age annuity corresponding to the payments received for the
account of an insured person between 1 January and 31 December
of any given year is calculated according to the scale applied in the course
of the said year by the old-age insurance organisation responsible for
constituting the annuity and in accordance with the age attained by the
insured person during the same year. Each scale is calculated on the
basis: (1) of a rate of interest fixed according to the rules set out later 1;
(2) of annual rates of mortality provisionally taken from the table P.M.F.
1921 2; (3) of the repayment, without interest, on the request of the'
insured person, of the payments made to his individual old-age insurance
account; (4) of payments being made quarterly in arrear; (5) of the
proportionate payment to the dependants of an insured person in case
of death, the death being deemed to occur in the middle of the quarter,
and the scale consequently allowing for the payment of a capital sum
equal, on the average, to one-eighth of the annuity at the date of death
of the annuitant.
In pursuance of these provisions, the deferred life annuities produced
by a single premium of 1 franc, the annuity being payable quarterly
in arrear with proportion to date of death, are obtained:
under the alienated capital system by applying the formula
3
1
under the repayable capital system by applying the formula
r =
•
3-
j
,
where x represents the age of the insured person at the moment of
payment of the single premium, x -f- n represents the age of the insured
1
2
Page 229.
See p. 173.
FRANCE
229
person at the time of payment
of the pension and D, N, and M the
usual commutation symbols 1.
The scales have been constructed by making the calculations to the
fourth decimal place and rounding off to the nearest tenth of a thousandth.
Special provisions and special scales have been fixed for anticipating
—as from age 55—the date of entering on pension or for postponing
it or again for providing for the reversion of the old-age pension under
the alienated capital system in favour of the surviving partner.
The following are the rules governing the determination of the rates
of interest to be used in the old-age insurance scales:
A Decree issued in the course of the third quarter of each year fixes
for the following year the maximum rate of interest to be used as a
basis for the scales of all the funds which effect old-age insurance.
Subject to this maximum the rate of interest for the scale of each fund
is fixed in accordance with the average rate earned, as at 31 December of the year of the last account, by the total of the funds invested
at that date". The rate adopted by a fund must be less than the maximum
rate fixed by Decree to the following extent: the 'difference must be at
least equal to 40 centimes if the average rate of interest of the investments is not more than 5 per cent. If, however, this average rate is more
than 5 per cent, the minimum difference is increased by half the difference
between 5 per cent, and the average rate, with a maximum difference of
2 per cent.
These provisions apply to insured persons in agriculture as well as
those in commerce and industry. In the agricultural scheme, as we
have indicated above, the fractional contribution allocated to the
individual old-age insurance account is fixed for all insured persons at
2 per cent, of the basic wage: in the case of insured persons aged more
than 30 years the complement, corresponding to 1.60 per cent, of the
basic wage, is paid by the State.
Decree of 28 October 1935 (insurance for commerce and industry)
The method of constituting old-age life annuities has remained approximately the same as that defined in the initial legislation.
It has already been stated that the minimum which is to be allocated
to the individual account is no longer fixed as a fraction of the basic
wage but as a fraction of the contribution (45 per cent, or 25 per cent.
according as the age of the insured person at the moment of payment is
at least equal to or is less than 30 years).
The rate of interest of the scales to be used in calculating the annuities
is still defined by the rules summarised above; nevertheless the mortality table P.M.F. 1921 has been replaced by the table P.M.F. 1931.
For the sake of example table XIII below reproduces from these scales
the columns which correspond to the normal age of entering on pension,
with interest at 4 per cent, and 5 per cent, respectively.
In addition, the Decree which indicated in the course of the last
quarter of each year the maximum rate of interest for the following
year is replaced by an Order which prescribes the upper and lower
limits to the rate of interest to be used for the old-age insurance scales.
(For the years 1936, 1937 and 1938 the maximum has always been fixed
at 4.80 per cent, and the minimum at 4 per cent.)
4=0
230
A C T U A R I A L T E C H N I Q U E AND FINANCIAL ORGANISATION
TABLE X I I I . —
L I F E A N N U I T I E S D E F E R R E D TO AGE 6 0 PR O D U C ED BY A
SINGLE PAYMENT OF 1 FRANC
Age at moment
of payment
(years)
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
9Q
30
31
32
33
34
35
36
37
38
39
40
41 ,
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
Alienated capital system
4 %
0.8912
0.8554
0.8206
0.7868
0.7541
0.7224
0.6917
0.6620
0.6333
0.6058
0.5795
0.5543
0.5303
0.5073
0.4853
0.4642
0.4441
0.4248
0.4063
0.3885
0.3715
0.3552
0.3395
0.3245
0.3101
0.2962
0.2829
0.2701
0.2578
0.2460
0.2346
0.2237
0.2132
0.2030
0.1933
0.1839
0.1749
0.1662
0.1579
0.1498
0.1421
0.1346
0.1274
0.1204
0.1137
0.1072
0.1010
0.0950
5 %
1.5065
1.4321
1.3609
1.2924
1.2268
1.1641
1.1040
1.0465
0.9917
0.9395
0.8902
0.8434
0.7992
0.7572
0.7175
0.6798
0.6441
0.6102
0.5781
0.5476
0.5186
0.4911
0.4650
0.4401
0.4166
0.3942
0.3729
0.3526
0.3334
0.3151
0.2976
0.2811
0.2653
0.2503
0.2360
0.2224
0.2095
0.1972
0.1855
0.1744
0.1638
0.1537
0.1441
0.1349
0.1262
0.1178
0.1099
0.1024
Repayable capital system
4 %
5 %
0.7300
0.6957
0.6629
0.6314
0.6011
0.5722
0.5445
0.5179
0.4925
0.4682
0.4450
0.4228
0.4015
0.3812
0.3617
0.3431
1.3075
1.2358
1.1677
1.1030
1.0415
0.9832
0.9279
0.8755
0.8258
0.7787
0.7340
0.6917
0.6517
0.6137
0.5778
0.5437
A OOCO
A cr A A
v.ox
0.3082
0.2919
0.2763
0.2614
0.2472
0.2336
0.2206
0.2081
0.1962
0.1849
0.1740
0.1637
0.1538
0.1444
0.1354
0.1268
0.1187
0.1109
0.1035
0.0965
0.0898
0.0834
0.0774
0.0717
0.0662
0.0611
0.0562
0.0517
0.0473
0.0432
0.0394
0.4808
0.4518
0.4244
0.3984
0.3737
0.3504
0.3283
0.3074
0.2877
0.2690
0.2513
0.2345
0.2187
0.2038
0.1897
0.1763
0.1638
0.1519
0.1407
0.1302
0.1203
0.1109
0.1022
0.0939
0.0862
0.0789
0.0721
0.0657
0.0598
0.0542
0.0491
f±
r.
The rate of interest to be used in calculating the actuarial reserves is
obtained b y taking the arithmetic mean of the rates of interest for the
231
FRANCE
scales used in calculating the annuities during the five years preceding
the date of the account.
Furthermore, the following rules have been laid down in regard to
the transfer of actuarial reserves. When an insured person who has
belonged successively to different funds claims the payment of his
old-age pension, the transfer of the actuarial reserves for the old-age
annuities to the fund which undertakes thé payment of the pension is
effected within one month. The total amount of the said reserves is
determined as at the effective date of transfer fixed by Order of the
Minister of Labour, in accordance with the scale of the transferor fund
in force at that date and with the age attained or to be attained by the
insured person in the course of the year during which the transfer
takes place. The fund which pays the old-age pension guarantees,
as regards the payment resulting from the transfer of the said actuarial reserve, the amount of the annuity in accordance with its own
scale.
Finally, it must be noted that, if a fund undertaking old-age and death
insurance experiences, in two successive years, a surplus in respect of
these risks, half the surplus for the second year is applied to .covering
the invalidity risk 1.
Where a pension is granted at an earlier age, the pension as payable
at age 60 is reduced by the following coefficients:
Coefficient
of
reduction
Age
55 years.
56
57
58
59
»
»
»
»
.
.
.
.
0.6433
0.6993
0.7618
0.8324
0.9105
Decree of 30 October 1935 and Decree of 15 June 1938 (agricultural
insurance)
The old-age pension in the agricultural scheme is still constituted by
the same method and on the same basis as in the scheme for commerce
and industry. It is formed by the accumulation in the individual
account of each insured person of that fraction of the contribution
allocated to old-age insurance.
It was pointed out above 2
(1) that the fraction of the contribution allocated to old-age insurance
was fixed from 1 January 1936 to 1 January 1939 at the following
figures:
Children under 16 years
w
women
M
men
1
2
See p . 226.
P a g e s 221-222.
Viaths of the total contribution, or
24 francs a year;
J 6/16ths of the total contribution or
francs na ,year;
i
n72
o f«««,™
rrtrt „.
J "/îoths of the total contribution, or
\
120 francs a year;
232
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
(2) that the fraction of the contribution to be allocated to old-age
insurance as from 1 January 1939 was fixed by Decree of 15 June
1938 as follows:
Insured persons
of the first class . \ V h s of the total contribur
I tion, or 24 francs a year;
Insured persons
of the second class. I V 1 « of the total contribur
I tion, or 72 francs a year;
ths
f
tribu
r
Insured persons
of the third class . iI 1 0 /«
™ francs
V**1 c a° n year;
tion, °or Ü
120
Insured
fourth class
of the total contribulnsurea nersons
persons of
oi the
tneiounn
class. Ì^ "Aoths
^
Qr l g Q f r a n c g a y e a r
GUARANTEE OF THE LEGAL MINIMA
Under the 1930 Act the cost of the complementary old-age pensions,
which increased up to the guaranteed minima the annuities entered
in the individual accounts, was charged in the scheme for commerce
and industry to the central institution (General Guarantee Fund) which
embodied it in the financial mechanism of one of its Funds (Augmentation and Joint Business Fund *). This Fund received in compensation
a levy made on the old-age insurance contribution. In accordance with
the rules governing the apportionment of the contributions summarised
above, the said levy was defined as follows :
(a) for each insured person aged 30 years or more: the whole of that
part of the old-age insurance contribution which is not entered
in the individual account—i.e. not more that 0.40 per cent, of
the basic wage;
(b) for each insured person under age 30: a fraction of that part of
the old-age insurance contribution which is not entered in the
individual account, up to a maximum of 1.60 per cent, of the basic
wage.
It has already been shown, moreover, that during the years 1930-1935
the percentages of the levies made on the old-age insurance contributions
in favour of the Augmentation and Joint Business Fund have always
been fixed at the maxima authorised by the Act, that is to say, at
0.40 per cent, and 1.60 per cent, of the basic wage respectively.
In the agricultural scheme the mechanism is the same in principle.
However, a special fund (Special Agricultural Fund) was created to
meet the supplementary cost of old-age pensions and to receive in
compensation a State grant equal to 80 per cent, of the old-age insurance
contributions (i.e. 1.60 per cent, of the basic wage) applicable to insured
persons aged more than 30 years.
In pursuance of the Decree of 28 October 1935, the fraction allocated
to the individual account is no longer defined as a function of the basic
wage but as a function of the total contribution 2. Furthermore, the
whole of that part of the old-age insurance contribution which is not
entered in the individual account is paid in all cases to the Augmentation Fund 3 of the General Guarantee Fund. In applying the above
1
2
3
See pp. 238-243.
See p. 220.
See p. 245.
233
FRANCE
clauses the following were the percentages of contributions assigned
to the,Augmentation Fund for the years 1936, 1937 and 1938 for the
purpose of meeting the cost of complementary old-age pensions:
25 hundredths when the age of the insured person is less than
30;
5 hundredths when the age of the insured person is equal to or
more than 30.
The Decree of 30 October 1935 abolished the Special Agricultural
Fund and at the same time the allocation of 80 per cent, of the old-age
insurance contributions which was being made to this fund. As a set-off
the State is obliged to pay each year to the Augmentation Fund a subsidy
equal to 40 per cent, of the total amount of the contributions entered
in the preceding year in the old-age insurance individual accounts of
agricultural insured persons.
The financial system of the complementary old-age pensions operates
within the General Guarantee Fund, and the annual totals of the levies
which have been assigned thereto appear below in section 6 of this
chapter, which is exclusively devoted to the financial organisation of
that Fund.
The Committee of Experts appointed in 1935 has valued, as regards
old-age insurance, the liabilities of the General Guarantee Fund not
covered by the fractions of contributions assigned thereto for this insurance. The calculations have been based on the wages corresponding to 3
different hypotheses and with a constant rate of interest equal to 4 per
cent. The following are the results obtained [30, p. 2] for the present
value of the liabilities as at 1 July 1935:
Average wage
(francs)
5,800
6,500
7,200
Scheme for
commerce
and industry
(million francs)
11,160
12,239
13,318
Agricultural
scheme
(million francs)
1,652
1,810
1,968
The same Committee adopted for the liability in respect of workers'
and peasants' pensions as at 1 July 1935 a present value of 1,776 million
francs.
§ 5. — Financial Equilibrium of Death Insurance
SCHEME FOR COMMERCE AND INDUSTRY
Under the 1930 Act the insurance of a capital sum payable at death
is entrusted to assessment funds which receive for this purpose a levy
on the so-called assessment contributions. Nevertheless the charge
which thereby falls on the assessment funds is limited to a proportion of
the basic wage (20 per cent.). The complementary amount required
to raise this amount to the minimum guaranteed by the Act falls on the
General Guarantee Fund. Furthermore, the risk of death, like the
other assessment risks, is subject to a compensation and a guarantee which operate in two stages, firstly by the intervention of the
Reinsurance Federations and then by a call on the General Guarantee
Fund.
234
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
The portions of contribution assigned respectively to the assessment
funds, the reinsurance federations and the General Guarantee Fund
have been fixed and then modified by various Decrees1.
The additions to the lump sum on death granted for family maintenance, like the orphans' pensions and the other additions for family
maintenance, are charged to a special fund, within the General Guarantee
Fund, which is supported by a levy of 6 per mille on the contributions.
On the coming into force of the Decree of 28 October 1935 the
guaranteed minimum of a thousand francs disappeared. The lump sum
on death is limited to 20 per cent, of the basic wage and its administration, together with that of the orphans' pensions is entrusted to the
accumulations funds which receive for this purpose a fractional contribution. This fraction has been fixed for 1936 at 15/1000 of the total
contributions, reduced to 12/1000 for 1937 and raised to 20/1000 for
1938.
The. additions granted in respect of family maintenance, for the
insurance against death, as for the other risks, remain charged to the
insurance funds which enter them for purposes of accounting with
the benefits t o which they relate.
The insurance funds set up a special reserve for the insurance against
death: this reserve grows each year by one-fifth of the amount of the
expenditure on insurance against death during the preceding financial
year, until it reaches the total amount of the expenditure on insurance
sgainst death «urmg tue preceuing îinanciai year.
AGRICULTURAL SCHEME
Under the legislation of 1930, the cost of the lump sums on death falls
on the mutual benefit societies, on agricultural branches of mutual
benefit societies or on departmental funds. By the Decree of 30 October
1935, it is transferred to the independent old-age insurance funds.
The income to meet their cost, as well as that of orphans' pensions,
continues to be constituted by a levy fixed by Order on the additional
contributions paid by the State for the benefit of insured persons in
agriculture.
The following amount was deducted from each monthly- additional
contribution for this purpose:
0.40 franc during 1936;
0.80 „
„ 1937 and during 1938.
§ 6. — Financial Equilibrium of Central Institutions
This section deals with:
(a) the " Federations ", whose rôle and powers have been profoundly
modified by the Decrees of October 1935;
(b) the central institution proper, that is, the General Guarantee
Fund.
1
See pp. 219-220.
FRANCE
235
THE " FEDERATIONS "
Under the 1930 legislation, the scheme for commerce and industry necessitated institutions of departmental or inter-departmental scope, called
Reinsurance Federations, whose function was:
(1) to reinsure the assessment risks;
(2) to equalise the cost of the medical care of invalids.
In the agricultural scheme the Reinsurance Federations were intended
to effect a second degree reinsurance for the risks of sickness, maternity and death.
The Decree of 28 October 1935 substituted, for the Reinsurance Federations, Regional Federations of Sickness and Maternity Funds.
The essential functions of these Regional Federations were:
(1) the guarantee and equalisation of the risks covered by the sickness
and maternity funds;
(2) participation in the control of sick persons and collaboration in
the work of social hygiene and prevention;
(3) the administration of insurance against invalidity,- as far as
concerns the care of invalids and the payment of invalidity
pensions during the first five years of drawing the pension.
Leaving on one side the guarantee and equalisation of the sickness
and maternity risks, the resources will be indicated that are provided for
the purpose of meeting the cost of the two other classes of expenditure,
which figure in the accounts as " Social Hygiene and Prevention " and
" Invalidity " respectively.
To the account of " Social Hygiene and Prevention " are credited:
(1) an initial grant fixed at one-sixth of the sums received by the
Regional Federation out of the assets of the Reinsurance Federations as at 31 December 1935;
(2) a levy, fixed by annual Decree 1, on the surplus receipts of the
other accounts of the Regional Federation;
(3) a contingent share from the sickness and maternity funds.
As regards the " Invalidity " account, a distinction must be made
between the normal resources and the exceptional resources intended
to form an " Initial Grant Fund ".
The " Initial Grant F u n d " is constituted by:
(1) a payment from the General Guarantee Fund, fixed at 400 million
francs ;
(2) an exceptional levy on the surplus receipts of the assessment
funds. This levy is equal to the smaller of the following two
amounts: (a) the general reserve of the assessment funds appearing
in the balance-sheet of 31 December 1934; (b) the average of
1
For the financial year 1936 this levy was fixed at one-half of the surpluses
in the equalisation and guarantee accounts and one-quarter of the surplus
in the " income " account. The balance of the surpluses is paid to the invalidity
account.
236
ACTUARIAL T E C H N I Q U E AND F I N A N C I A L
ORGANISATION
the general reserve and the special reserve of the assessment funds
appearing in the balance-sheet of 31 December 1934.
Nevertheless, in the case of assessment funds whose profit
and loss account for the financial year 1935-36 shows a debit
balance, the reserves which are brought into play are taken not
from the balance-sheet of 31 December 1934, but from that of
31 March 1936.
Moreover, in the case of assessment funds whose profit and
loss account for either 1934 or 1935-36 shows a debit balance,
the levy is limited to not more than the amount of the general
reserve or of the average of the special and general reserves
appearing in the balance-sheet of 31 December 1933;
(3) the allocation of seven-twelfths of the assets of the Reinsurance
Federations as at 31 December 1935 1 .
The normal resources include:
(1) an annual levy fixed at 20 per cent, of the surplus receipts of the
. assessment funds;
(2) contingently, in case the resources previously mentioned prove
to be insufficient, a levy on the total contribution income. The
following amounts have, in fact, been allocated to the Regional
Federations under the heading of " invalidity and care of invalids":
in 1936, 5/1000 of the total contribution income;
in 1937,
/JOOO ii
>i
M
in 1938, 69/iooo „
„
.,
s>
>i
In the agricultural scheme the Decree of 30 October 1935 instituted
National Reinsurance Federations whose functions correspond with
those of the Regional Federations for commerce and industry with,
however, important differences in the manner in which they carried
them out. The following three duties are imposed on the National
Reinsurance Federations (for each of which a special account is kept) :
(1) reinsurance of the sickness and maternity risks;
(2) participation in the control of sick persons and collaboration in
the work of social hygiene and prevention;
(3). the provision of medical care of invalids and invalidity pensions
during the first five years after the date of entering on pension.
The following resources are allocated to social hygiene and prevention:
(1) a fraction of the assets of the Agricultural Reinsurance Federations which were replaced by the National Reinsurance Federations;
(2) contingently, the balance of the annual surpluses of the reinsurance account after allocation of 35 per cent, to reserve;
(3) contingently, subsidies from the sickness and maternity funds
or a share in the cost of control services.
1
To these resources must be added a part of the surplus receipts for 1936
appearing in the other accounts of the Regional Federation. (See above.)
237
FRANCE
To invalidity there is allocated a permanent receipt defined as a
fraction, fixed by Order, of the additional contribution paid by the
State. The following amounts were paid to the National Reinsurance
Federations to be allocated to the invalidity risk:
In 1936
2.60 francs per insured person per month;
In 1937 and 1938.
2 ,,
G E N E R A L GUARANTEE
FUND
Preparatory
Investigations
In the Bill [1, 2] brought forward by the Government in 1921 provision
was made for the creation of a General Guarantee F u n d comprising:
an equalisation fund designed to counteract the consequences of the
inequality of the risks in the various regions;
a reinsurance or reserve fund to cover exceptional risks; and
a fund intended to contribute to the payment of complementary
pensions, receiving for this purpose a p a r t of the employers'
contributions relating to pensioned or alien employees, fines and
double duties, and the State's contribution t o the guarantee of
the minimum invalidity and old-age pensions.
The subsequent investigations gave great prominence to a fund called
" Augmentation and Joint Business F u n d ", which was intended t o
support very varied charges arising out of practically all the risks and
developing independently from each other: this fund would form a
large central institution, playing an essential part in the financial
equilibrium of the system considered as a whole. As from 1926 the
preparatory investigations laid great stress on the financial equilibrium
of this fund, by considering either the present values (or their expression
in perpetual annuities) of its liabilities and its expected income or the
probable progress of the fund during a certain number of years, t h a t
is to say, by calculating annual estimates of its receipts and expenditure.
In chronological order the first1 to appear was a budget of the Augmentation and Joint Business Fund in the form of perpetual annuities w i t h
interest at the rate of 5 per cent. It is to be noted t h a t this budget
covers b o t h compulsorily and voluntarily insured persons and it includes
a scheme of insurance against unemployment which disappears in the
later forecasts.
The annual estimates of the progress of the Augmentation and Joint
Business F u n d include on each occasion a table of receipts and of
expenditure and the comparison of the total results obtained from these
two tables. These estimates are not reproduced here; t h e y are very
voluminous and relate to the provisions taken into consideration in the
preparatory investigations which have for the most p a r t been profoundly
modified before being included in the legislation 2.
1
Report of the Senatorial Committee on Hygiene, 1925, see Bibliography,
No. 3, pp. 214-215.
2
Reference may be made to the following Parliamentary Reports:
Recommendation of the Senatorial Finance Commission, 1927 : Bibliography, No. 5, pp. 143 et seq.
Recommendation of the Finance Commission of the Chamber of
Deputies, 1928; Bibliography, No. 7, pp. 62 et seq.
Recommendation of the Senatorial Finance Commission, 1930:
Bibliography, No. 9, pp. 21 et seq.
238
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
From 1 July 1930 to 31 December 1935
The 1930 legislation instituted the General Guarantee Fund as a
central institution whose operations are shared between four funds:
on the one hand the Augmentation and Joint Business Fund and the
Guarantee and Equalisation Fund, which are common to the schemes
for commerce and industry and for agriculture, on the other hand the
Special Agricultural Fund and the Agricultural Relief Fund which are
peculiar to the agricultural scheme. Each of these funds will be considered
separately: their principal items of receipt and expenditure will be
reviewed and their role and the powers attributed to them by law will
be indicated.
Augmentation and Joint Business Fund
(1) Receipts. — The Augmentation and Joint Business Fund was
constituted by an initial grant provided by:
the Reserye Fund accumulated under the scheme of workers' and
peasants' pensions; and
a levy fixed at one-half of the surplus assets in the workers' and
peasants' pension funds and, in particular, in the workers' and
peasants' pensions section of the National Old-Age Pensions Fund.
This fund was also credited during the financial year 1934 with a fraction
of the balance of the Stamps Fund for Workers' and Peasants' Pensions.
The normal resources of the Augmentation and Joint Business Fund
may be divided into three groups according as they are derived from
(i) public moneys; (ii) a levy on contributions or surplus assets, or
(iii) miscellaneous sources:
(i)
Resources derived from the State, departments and communes:
a State subsidy, payable in quarterly instalments, amounting to
540 million francs a year;
the payment of the savings effected on the expenditure on relief,
to the extent of the total in the case of the State and one-half
in the case of the departments and communes;
a special appropriation, fixed annually by the .Finance Act, out of
the share of the supplementary royalty on the profits of the Bank
of France accruing to the Treasury and out of the share of the
proceeds of games of chance accruing.to the State;
the repayment of expenditure relating, on the one hand, to the
complementary old-age pensions granted to wage earners aged
from 60 to 65 years at the date of coming into force of the Act,
and, on the other hand, to the subsidies of 6 francs a month
which augment the contributions paid by pensioners who wish to
preserve for themselves and their wives the benefit of the
insurance against sickness;
the repayment of the additional benefits paid to insured persons in
agriculture.
(ii) Levies on contributions and on surplus .assets:
levies made on all contributions in accordance with the proportions
fixed each year by Decree 1-,
1
See p. 219.
FRANCE
239
the employers' contributions in respect of insured persons whose wage
exceeds the limit, employees who are in receipt of a pension or
aged more than 60 years, and alien employees who are excluded
from the benefit of the Act;
a levy of 3 per cent, on the surplus receipts of the assessment funds;
the levy of 6 per cent., provided in the Act as from the tenth year,
on the surplus assets shown in the balance-sheets of the invalidity
and old-age insurance funds;
a levy on voluntary insurance contributions and a levy of 20 francs
a year on the contributions of the wives of insured men who,
not being themselves wage earners, are admitted to the benefit
of the special insurance.
(iii) Miscellaneous resources:
The unutilised portion in each year of the income from the proceeds
of the sale of the Grown jewels (Act of 31 December 1895) ;
the arrears lapsing under the five-year period of prescription and the
repayable capital sums not refunded to the dependants of insured
persons who have been dead for more than five years;
the total proceeds of fines in basic amount and additional tenths,
and donations and bequests.
To these resources must be added the interest on the investments
allocated to the Augmentation and Joint Business Fund.
Table XIV below shows in respect of the principal items of receipt
the results of the operation of the Augmentation and Joint Business
Fund from 1 July 1930 until 31 December 1936.
(2) Expenditure. — Up to 1 April 1934 all the expenditure on invalidity insurance was charged to the Augmentation and Joint J3usiness Fund.
As from that date only the following items of payment were charged to
it under the heading of invalidity insurance:
(1) the complementary pensions required to bring the pensions u p
to the guaranteed minima;
(2) additions in respect of family maintenance.
The duties entrusted to the Augmentation and Joint Business Fund
include essentially:
the guarantee of the legal minima for old-age and invalidity pensions
and for lump sums payable on death;
a share, eventually assigned to the assessment funds, in the cost of
reducing the percentage of medical and pharmaceutical expenses
left charged on the insured person;
an increase of 6 francs a month to be added to the contribution of
insured persons in receipt of pension who maintain the benefit
(as well as that of their wives) of insurance against sickness;
the repayment of expenditure consequent on the winding-up of the
workers' and peasants' pensions scheme;
the payment of the employer's contribution, in the place of the
employer, for insured persons registered on account of their
family charges;
the payment of all additional sums consequent on family maintenance
expenses;
240
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
TABLE X I V . — RECEIPTS 1 OF T H E AUGMENTATION
AND JOINT BUSINESS FUND
(in thousands of francs)
1930
1931
1932
1933
Exceptional
Winding-up of
t h e Pension
Scheme for
Workers and
Peasants
Assets of t h e Reserve
Fund
Surplus assets of t h e
Pensions F u n d s for
W o r k e r s and Peas a n t s and- of t h e
N a t i o n a l Old-Age
Pension Fund
(workers' and peasants'
pensions
section)
1934
-14,951
Resources provided
Fixed State Subsidv
Special appropriation from t h e profits
of the B a n k of F r a n c e and proceeds
from games of c h a n c e
Increase of contribution granted for
insured persons in agriculture . .
Grant in aid of medical benefits for
old-age pensioners
5,435
27,711
36
7,560
3,331
16,157
10
by the State
ü'lUjUD'l
J'1U,UUU
8,000
2,893
61,621
98,048 120,705
173
Levies on contributions
Old-age, death, family maintenance
a n d administration
allowance . . . .
Maintenance of rights
of unemployed insured persons . .
E m p l o y e e s whose wages exceed
the
Employers'
limit for compulsory insurance. .
contributions
in respect of
Employees in receipt
of
pensions
or
aliens
Levies on surplus assets of assessment
funds
Levies on t h e
contributions
assigned to
351,368
—
41,915
—
—
—
•
assets
411,001 1,004,201 >46,804
35,864
27,116
33,378
27,977
54,068
33,286
'66,150
43,439
63,356
95,464
66,306
53,780
45,637
6,087
16,090
13,339
15,438
—
.
and surplus
61,628
Miscellaneous
Totals
1936
resources
L e v y on t h e balance
of t h e S t a m p s F u n d
for workers' and
p e a s a n t s ' pensions
Unutilised portion of t h e income
produced b y t h e sale of Crown
jewels
" . . .
Proceeds of fines
I n t e r e s t on i n v e s t m e n t s
Miscellaneous
1935
—
3,633
—'
167
—
—
128
4
•—
21,274
39,501
5,792
resources
287
73
153,812
93
127
107,306 88,267
141 298,627
270,868 986.361 743,452 764,680 1,359,043 1,693,977 821,179
1
The receipts in respect of voluntary insurance and of t h e special insurance for wives
of insured m e n , not being themselves wage earners, are not included in this table.
241
FRANCE
TABLE XV. —• EXPENDITURE OF THE AUGMENTATION
AND JOINT BUSINESS FUND 1
(in thousands of francs)
Nature of expenditure
1930
Orphans' pensions . . .
Payment of the contribution in the place of
the employer for insured persons registered on account of
their family charges .
Increases granted for
insured persons in
Family charges:
Sickness and maternity
Death
Invalidity
Complementary
payments on death . . .
Grand in aid of medical
benefits for old-age
pensioners
Invalidity :
Complementary penCare of invalids and
miscellaneous . . .
Maintenance of rights
of unemployed insured persons
Complementary old-age
:
'
1931
1932
1933
1934
1935
1936
78
500
1,069
1,923
1,247
196
77
16,312
16,769
17,371
11,678
8,138
94,607
88,817
68,295 157,529
77,354
9,078
54
—
17,254
1,116
—
16,994
1,337
—
17,204
1,631
125
20,597
1,663
468
11,504
938
511
17
481
700
805
1,060
587
9
43
.77
341
112
590
420
1,713
1,948
307
826
7,823
11,718
9,949
—
—
—
—
—
—
35
—
163
Administration expenses
of General Guarantee
Fund
1,797 37,745
5,410
3,305
8,695
4,224
238
Administration expenses
of central services . .
868
6,453
—
—
59,417
—
—
Allowance for administration expenses . . .
480 56,906 90,742 95,886 96,501 116,443
36,346
Winding-up of pension
scheme for workers
and peasants
. . . . 85,504 529,056 415,923 384,286 349,563 323,430
—
Contribution to volun-.
tary i n s u r a n c e . . . .
—
—
—
4,500
6,000
—
—
Various expenses . . .
—
9
8
132
320
4,970 1,000,506
Totals
. . . .
88,649 647,652 625,696 612,813 634,680 665,246 1,153,085
i Expenditure due to voluntary insurance and special insurance of insured persons'
wives who are not themselves wage earners are not included in this table.
a contingent share—to be fixed annually by Decree—in the payment
by the assessment funds of the half-contribution for old-age on
behalf of insured persons who are sick;
all the expenses of management and operation of all the institutions;
16
242
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
the reimbursement of the payments made by the funds in the place
of unemployed insured persons;
expenditure relating to family maintenance expenses in the special
insurance scheme-, and
the increases granted for insured persons in agriculture.
For a certain number of these charges the Act imposes on the Augmentation and Joint Business Fund only a contingent share: according to
the funds available and in conformity with a percentage to be fixed
annually by Decree.
The expenditure undertaken by the Augmentation and Joint Business
Fund since the coming into force of the Act until 31 December 1936
has amounted to the'figures shown in table XV above.
Guarantee and Equalisation Fund
1. Receipts. — The resources of this Fund comprised:
a levy of 2 per cent, on all the contributions (this rate being subject
to abatement when the assets of the Fund have reached 100 million
francs) ;
a contingent levy, which may reach 0.40 per cent, of the basic wage, on
the old-age contributions of insured persons aged less than 30
years;
a levy of 5 per cent, on the portions of contributions assigned to the
assessment risks ;
a levy of 2 per cent, on the annual surplus receipts of the assessment
funds;
4 per cent, of the levy, provided by the Act as from the tenth year,
on the surplus assets disclosed in the balance-sheets of the invalidity and old-age insurance funds.
2. Expenditure. — The Guarantee and Equalisation Fund was
instituted essentially in order to make good any deficit of the receipts
of the insurance funds and to prevent their becoming insolvent. As
from 1 April 1934, to this function has been added that of the invalidity
insurance (excluding the complements necessary to bring the pensions
up to the guaranteed minima and the additions in respect of family
maintenance expenses).
Table XVII summarises the results of the operation of the Guarantee
and Equalisation Fund.
Special Agricultural Fund
The Special Agricultural Fund was intended to guarantee the payment
to agricultural insured persons of minimum old-age pensions. Its
resources were constituted by a payment from the Augmentation and
Joint Business Fund equal to 80 per cent of the contributions of the
insured persons aged more than 30 years and by its own interest:
they have attained the totals shown on p. 243.
The Fund was charged for the first time in 1936 with the supplements
to old-age pensions, amounting to 123,000 francs. The complete figures
for the administration of the Special Agricultural Fund are given in
table XVII below.
Agricultural Relief Fund
The purpose of the Agricultural Relief Fund was to allocate, as
exceptional payments, grants to the agricultural insurance funds which
243
FRANCE
in consequence of epidemics or other unavoidable cause find themselves
unable to carry out their engagements. It also had to meet the expenditure consequent upon the extension of invalidity insurance to wage
earners in agriculture or forestry. Originally it was maintained by a
State grant equal
to 80 per cent.
of contributions of
insured persons over
30 years of age
(thousands of francs)
1932
1933
1934
1935
1936
7,004'
18,169
3,033
86,640
28,381
Total
Interest on
investments
(thousands
of francs)
3,330
4,725
5,732
143,227
13,787
payment equal to 5 per cent, of the total amount of contributions and
increases allocated to the institutions which carry on agricultural
insurance. There were assigned to it for the purpose of covering the
cost of invalidity pensions:
(1) a sum of 10 million francs levied on the workers' and peasants'
pensions Stamps Fund (this sum was credited in 1934);
(2) a levy equal to one-ninth of the increase of contribution paid for
agricultural insured persons under the heading of assessment risks.
Its receipts have been constituted in the following manner:
TABLE XVI. —
RECEIPTS OF THE AGRICULTURAL RELIEF FUND
(in thousands of francs)
1931
1
1932
1933
5,794
5,001
1934
1935
1936
5,989
5,014
3,469
1,834
7,092
4,738
10,000
3,364
1,788
2,048
21,187 13,894
10,255
Levy of 5 per cent, on
contributions and in814
Levy to cover invalidity
expenses
Portion of workers' and
peasants' Pension
Stamps Fund . . . .
Interest on investments .
8
Total receipts
822
. .
5,794
5,001
Its expenditure, which was devoted entirely to covering the invalidity
risk, amounted to:
186,000 francs in 1935;
691,000 francs in 1936.
244
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
The total results of the administration of the Agricultural Relief
Fund are shown in table XVII below.
Summary of the Administration of the General Guarantee Fund
Table XVII shows the annual totals of receipts and expenditure for
each of the Funds just considered and consequently summarises the
administration of the General Guarantee Fund from the date of its
creation to 31 December 1936.
TABLE X V I I .
GENERAL SUMMARY OF RECEIPTS AND
OF THE GENERAL GUARANTEE FUND
EXPENDITURE
(in thousands of francs)
Name of fund
Year
Receipts
Expenditure
Surplus ( + )
or
deficiencies (—)
Augmentation and Joint
Business Fund
' . . . . '
1930
1931
1932
1933
1934
1935
1936
270,868
986,365
743,632
769,528
1,378,453
1,710,830
845,290
88,650
647,716
629,913
625,643
645,229
692,230
1,163,841
+
182,218
. + 338,649
+ 113,719
+
143,885
+
733,224
+ 1,018,600
— 318,551
6,704,966
4,493,222
+2,211,744
Total
Guarantee
and
. . . .
20
635
9,474
535,564
+
+
+
+
+
—
75,656
90,939
142,857
217,548282,268
430,143
545,693
+
379,125
822
5,794
5,001
21,187
13,895
10,255
186
691
+
+
+
+
+
+
822
5,794
5,001
21,187
13,709
9,564
56,954
877
+
56,077
7,004
18,169
6,363
91,366
34,113
123
+
+
+
+
+
7,004
18,169
6,363
91,366
33,990
. . . .
157,015
123
+
156,892
. . .
7,843,753
5,039,915
Equalisa-
Total
. . . .
A g r i c u l t u r a l Relief F u n d
Total
.
Grand total
1930
1931
1932
1933
1934
1935
1936
. . . .
Special Agricultural F u n d .
Total
1930
1931
1932
1933
1934
1935
1936
1930
1931
1932
1933
1934
1935
1936
75,656
90,939
142,877
218,183
291,742
105,421
924,818
+ 2,803,838
FRANCE
245
Decrees of October 1935
By the Decrees of October 1935 the administration of the General
Guarantee Fund has come to mean that of an Augmentation Fund and
that of a Guarantee Fund: subject to a certain number of modifications
made at the same time to their respective functions, the first takes the
place of the Augmentation and Joint Business Fund and the second
that of the Guarantee and Equalisation Fund.
The Augmentation Fund supports, on the one hand, the expenditure
entailed by the winding-up of the workers' and peasants' pensions
scheme, and, on the other hand, the complementary pensions designed
to bring up to the legal minima the amounts of the old-age pensions
paid by the insurance funds, both in the scheme for commerce and
industry and also in that for agriculture.
It was also made responsible for increasing by 15 per cent, the actuarial
reserves for voluntarily insured persons when these reserves are transferred to an independent mutual aid fund or to the National Old-Age
Pensions Fund.
It is maintained by:
an annual contribution from the State, whose amount is specifically
fixed at 140 million francs *;
the employers' contributions relating to wage earners aged more
than 60 or in receipt of a pension;
the portion of the old-age insurance contribution which is not credited
to the individual account;
a levy of 20 francs a year on the contributions of all wives of insured
persons who are not themselves wage earners;
the total amount of fines in basic amounts and additional tenths ;
the unutilised portion in each year of the income from the proceeds
of the sale of the Crown jewels (Act of 31 December 1895) ;
the arrears lapsing under the five-year period of prescription and the
repayable capital sums not refunded to the dependants of insured
persons who have been dead for more than five years ;
the payments out of the surplus assets of the workers' and peasants'
pension Funds;
the repayment by the State of the expenditure charged to the Fund
in respect of pensions guaranteed to wage earners aged between 60 and 65 years at the date of coming into force of
the Act;
the balance of the account " proceeds of the sale of stamps for social
insurance " instituted by the 1930 Act, which had to be woundup as at 31 December 1936;
an appropriation, at a rate which is fixed annually by the Finance
Act, out of the share of the supplementary royalty on the profits
of the Bank of France accruing to the Treasury and out of
the share of the proceeds of games of chance accruing to the
State (provided that the total appropriation shall not exceed
a maximum of 5 million francs); and
an annual grant, out of the general budget, equal to 40 per cent, of
the total amount of contributions credited in the preceding year
1
The State may be required to make a supplementary contribution under
the conditions and within the limits defined by a guarantee clause reproduced
above (pp. 192-193).
246
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
to the individual old-age insurance accounts of insured persons
in agriculture.
T h e operations of t h e Augmentation F u n d during 1936 are shown in
Table X V I I I .
TABLE XVIII.
AUGMENTATION FUND RECEIPTS
AND EXPENDITURE FOR 1936
(in thousands of francs)
Receipts
Share of balance of the Augmentation and Joint Business
Fund
Employers' contributions in respect of employed persons
over 60 or pensioners
Surplus assets of the workers' and peasants' pensions funds
Fixed State subsidy
Proceeds of fines
Unutilised portion of the income from the proceeds of the
sale of Crown jewels
Levy on old-age contributions
Various receipts
Interest on investments
Total
1,000,000
36,478
3,994
140,000
241
140
58,096
2,854
24,464
1,266,267
Expenditure
Winding up of the pension scheme for workers and
peasants
-. .
Guarantee of minimum old-age pension
Orphans' pensions
Augmentation of actuarial reserves of voluntarily insured
persons
Various
Total
288,825
308
805
6,637
300,083
596,658
The purpose of the Guarantee Fund is to make grants or advances to
the Regional Federations in cases where these are not able to guarantee
the risks of sickness and maternity. There m a y also be made, out of
the resources of this fund, exceptional appropriations in favour of the
Regional Federations for the purpose of meeting expenditure on invalidity insurance. Each year it furnishes the amount necessary to
defray the cost of administration of the General Guarantee Fund.
The Guarantee F u n d received on 1 J a n u a r y 1936 an initial grant of
the assets of t h e pre-existent Guarantee and Equalisation Fund. Its
resources normally include:
an appropriation out of the surplus receipts of the assessment funds
and
in the event of its assets falling below 200 million francs, an exceptional a n d temporary levy on the contributions assigned to the
assessment risks.
247
FRANCE
The Decree of 30 October 1935 involves the winding-up of the Special
Agricultural Fund and of the Agricultural Relief Fund: it stipulates that
the assets of the latter fund shall be divided among the National
Reinsurance Federations for the purpose of the payment of invalidity
pensions.
The Guarantee Fund received in 1936:
Thousands of
francs
As a fraction of the balance of the Guarantee and
Equalisation Fund
As interest on investments
Total
500,000
18,815
518,815
During the same year it had to meet the administration expenses of
the General Guarantee Fund, amounting to 3,750,000 francs.
CHAPTER IV
FINANCIAL ADMINISTRATION
§ 1. — Investment of Funds: Statutory Provisions and Regulations
METHOD OF INVESTMENT
Pursuant to the 1930 Act the insurance funds deposit either with
the Deposit and Trust Fund or with the Bank of France any moneys
in excess of the amount of cash which they are authorised to keep in
hand. The Deposit and Trust Fund must utilise these moneys with due
regard to the nature and extent of the risks insured by the funds:
(1) to the extent of one-half at the instance of the funds and subject
to certain approvals;
(2) as regards the portion remaining to be invested, on its own
initiative.
".
The Decree of 15 May 1934 withdrew from this arrangement for
the period 1 June 1934-31 December 1940 three-quarters of the disposable moneys of the accumulation funds and of the Augmentation
and Joint Business Fund, but allowed the earlier provisions to remain
as regards the other quarter.
The Decrees of October 1935 maintained it, while stipulating, however, that the investments made on the initiative of the insurance funds
or of the Federations—that is to say at the instance of the management
committee of the Fund (or of the Federation) or of a committee authorised by it—must receive the endorsement of the management committee of the General Guarantee Fund or of a committee authorised by
it, if it is a question of investments other than in State securities,
securities of the " Caisse autonome d'amortissement ", or negotiable
securities quoted on the Paris Stock Exchange.
NATURE or
THE INVESTMENTS AUTHORISED OR PRESCRIBED
1930 Act
The investments made directly by the Deposit and Trust Fund on
its own initiative are limited to State securities or securities guaranteed
by the State, foreign securities under conditions to be laid down by a
Decree issued on the recommendation of the Ministers of Finance,
Labour and Foreign Affairs, land or communal bonds issued by the
Land Bank (Crédit Foncier), the acquisition of real estate, and bonds
of the principal public railway companies.
FRANCE
249
The investments made at the instance of the social insurance funds
include besides various categories which may be grouped as follows:
1. Investments of a social character, including:
(a) loans to departments, communes, federations of communes,
colonies, protectorates, chambers of commerce, chambers of
agriculture, chambers of handicrafts or any other public institutions, or in securities guaranteed by these institutions;
(b) loans to offices, societies and charitable trusts for workers'
dwellings, real estate credit societies, societies and institutions
for mutual credit and co-operation in agriculture, and provident
and public health institutions recognised as being of public
utility;
(c) underwriting debentures and bonds of the National Agricultural Credit Fund and of various other societies eligible to
obtain a. subsidy from the State or to obtain a loan at a reduced
rate of interest from the State or from the National Agricultural Credit Fund.
2. The acquisition of land or buildings, subject to the approval of
the General Guarantee Fund and the acquisition of land for
re-afforestation or of existing forests, subject to the previous
approval of the Superior Insurance Council.
3. All securities accepted as collateral by the Bank of France, as
well as first mortgages in property in France, up to a total amount
of 50 per cent, of the value of the property, subject to the approval
of the General Guarantee Fund.
Decree of 15 May 1934
The Decree of 15 May 1934 introduced into this initial system two
series of important modifications:
1. It decided, as a transitional departure from the provisions of
the Act, that the accumulation funds and the General Guarantee
Fund should pay, from 1 June 1934 until 31 December 1940,
75 per cent, of their available moneys for the purpose of constituting a joint fund managed by the Deposit and Trust Fund;
2. it modified the normal list of authorised investments,
A summary analysis of each of these modifications is given below.
Joint Works Fund
The Joint Fund instituted by the Decree of 15 May 1934 for the purpose
of carrying out an extensive programme of public works to relieve
unemployment by utilising the available moneys of the social insurance
funds has received the name of " Joint Works Fund ".
The available moneys of this fund are invested by preference in loans
to the bodies which participate in the carrying out of works for the
purpose of reducing unemployment, in accordance with the programme
drawn up by the National Board of Public Works to Relieve Unemployment. These bodies may be departments, communes, federations of
communes, national railway systems, public institutions, colonies,
protectorates, holders of concessions for specially approved public
works, and all other duly constituted bodies which have secured the
guarantee of a department or commune.
250
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
Loans are subject to the following rules. The contracts are drawn
up in accordance with a uniform type adopted by the National Board:
they are concluded by the Deposit and Trust Fund. The duration of
the loans may not exceed 30 years, except in the case of loans to national
railway systems in respect of which it may be specially increased to
50 years.
Each year the Deposit and Trust Fund collects the annual payments
due at the times stated in the contracts; after collection it credits the
account of each fund with the portion of the annual payment due to
it in accordance with the sums paid to the Joint Fund out of its available
moneys. Each fund also has the right to a share of the other income of
the Joint Fund which is derived in particular from the short-term investments which the Deposit Fund may be led to make provisionally.
With a view to providing for the liquidity of their finances in the
face of any contingency, funds are authorised as from 31 December 1940
to transfer among themselves the debts due to them. In default of a
direct agreement, the Deposit and Trust Fund acts ex officio with the
portion of the funds for the investment of which it is directly responsible.
Modifications made in the list of authorised investments
The bonds of departments, communes and federations of communes
and the loans to these bodies are included among the investments which
can be made directly by the Deposit and Trust Fund on its own initiative.
- On the other hand, the following categories of investment cease to
be authorised:
stocks, bonds and shares and loans in respect of societies for workers'
dwellings and institutions of mutual credit and co-operation in
agriculture ;
foreign securities;
the acquisition of forests and lands for re-afforestation;
loans to public health and provident institutions recognised as being
of public utility.
Moreover, mortgage loans and the acquisition of buildings are limited
to buildings built and completely finished and situated in towns of more
than 100,000 inhabitants or in the department of the Seine. For any
one fund the total of the investments in real estate must not exceed
10 per cent, of the total amount of its investments.
Decree of October 1935
Pursuant to the Decree of 28 October 1935, the authorised investments
are all included in one list which limits the choice in all cases, that is
to say when they are made at the instance of the social insurance funds
as well as when they depend on the sole initiative of the Deposit and
Trust Fund. Nevertheless, in the first case, investments in certain
categories are authorised only after approval, as indicated above, by
the governing body of the General Guarantee Fund or by a committee
authorised by it.
The investments which appear on this limiting list may be grouped
in broad categories in the following manner:
(1) Slate securities or negotiable securities which are quoted on the
Paris Stock Exchange: State securities or those guaranteed by
the State, securities of the " Caisse autonome d'amortissement ",
FRANCE
251
bonds and debentures of the National Credit Fund, bonds and
debentures of the principal public railway companies, land,
communal or maritime bonds issued by the Land Bank, bonds and
debentures of departments, communes, federations of communes,
public institutions, colonies, protectorates, or mandated territories,
securities guaranteed by these bodies or institutions, bonds and
debentures of the National Agricultural Credit Fund, and any
other bonds accepted as collateral by the Bank of France.
(2) Simple loans: loans to departments, communes, federations of
communes, public establishments, colonies, protectorates or mandated territories.
(3) Mortgage loans: first mortgage loans on buildings completely
finished and situated in towns of more than 100,000 inhabitants
and in the department of the Seine, up to a total maximum of
50 per cent, of the value of the building.
(4) Acquisition of buildings: acquisition of buildings completely
finished and situated in towns of more than 100,000 inhabitants
or in the department of the Seine. Nevertheless, the social insurance funds* may be authorised by the General Guarantee Fund,
by way of exception, for the purpose of installing their administrative machinery, to acquire land or completed buildings and to
erect buildings and fit them out. The total of the investments
of any one fund or federation in buildings, including those made
for the purpose of installing its administrative machinery, may
not exceed 15 per cent, of the total amount of its invested assets.
No new investment in buildings may be made by a fund for
which the proportion mentioned above has already been exceeded,
nor may it be made for the account of such a fund so long as its
position is not in conformity with the regulations.
.Apart from the acquisition of house property, securities quoted
on the Paris Stock Exchange or loans to the Joint Works Fund,
social insurance funds and their regional federations are not
permitted to make any investments for a period of more than
30 years. Social insurance funds and their regional federations
may be authorised by the Ministry of Labour, on their request
and in view of justifiable cash requirements, to transfer to each
other securities, title deeds to property, or other documents of
title held by them. The nature of the investments that may be
made by employers' pensions funds, and more generally by works
insurance institutions, are subject to the special provisions laid
down in public administrative regulations issued under the Decree
of 14 June 1938. These regulations stipulate in particular:
(1) the maximum proportion of the funds which may be invested
or deposited in the establishment or undertaking in which the
insured persons work; (2) the proportion of the investment's
which must necessarily be in Government securities.
Provisions peculiar to the Regional Federations of sickness and maternity
funds
In the investment of the available moneys of the Regional Federations
a distinction may be made between true investments and the use of a
part of the available moneys for works of prevention and cure.
1
And also the Regional Federations, under the Decree of 14 June 1938.
252
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
The true investments of the Regional Federations are subject to the
same rales as the investments of the invalidity, old-age and death funds,
with the exception of two special provisions:
(1) The proportion of the available moneys of the Regional Federations which must be invested exclusively either in State
Securities or those of the Autonomous Amortisation Fund or in
negotiable securities quoted on the Paris Bourse, is fixed by an
Order of the Ministers of Labour and Finance l .
(2) The Regional Federations as a whole are obliged to pay to the
Joint Works Fund a sum at least equal to 300 million francs;
they may later transfer their credits on this Fund to the invalidity, old-age and death insurance funds for the purpose of
constituting actuarial reserves for the pensions paid by these
institutions.
The utilisation of a portion of the available moneys for the supervision
of sick persons and for the prevention and cure of sickness is provided for
under the following conditions.
With a view to reducing the later expenditure of the insurance schemes
and in particular of the invalidity insurance, the Regional Federations
may, in agreement with the funds, on the recommendation of- the
Minister of Public Health and on the authorisation of the Minister of
Labour, initiate or subsidise works of common interest, such as: maternity and infant welfare centres, dispensaries and other institutions or
establishments for ' promoting public health and the prevention of
disease in general, holiday settlements, establishments for prevention
and cure, sanatoria, convalescent homes and homes for the aged, and
societies which organise admissions to preventive or curative institutions.
Expenditure incurred under this heading, even if it involves the
acquisition of buildings, is not classed as investments.
The Regional Federations may also, with the consent of the Minister
of Labour, grant loans to bodies or establishments mentioned in the
list of investments authorised for the purpose of carrying out works
for the purpose of the control of sick persons, and the cure and prevention
of sickness. The rate of interest on these loans is fixed by an Order of
the Ministers of Labour and Finance; another Order of the Ministers
of Labour and Finance fixes each year the maximum total of the
sums available to the Federations for applying to their programme of
control, cure and prevention 2.
Decree of 7 September 1936
According to this Decree all sums remaining available in the Joint
Works Fund after the necessary deductions have been made to cover
1
An Order of 28 May 1938 stipulates that this proportion must be not less
than three-quarters of the invested assets, no account being taken of the
outstanding
balance of the special account for social hygiene and prevention.
2
An Order of 21 June 1938 provides that this maximum will depend on
the figures in the accounts of the Regional Federations (see p. 264): the
sums left at the. disposal of the Federations for the purposes in question
are limited to:
(1) The outstanding balance of the account for social hygiene, prevention
and supervision;
(2) One-eighth of the invalidity reserve fund.
TRANCE
253
commitments in connection with the plan of extensive public works to
relieve unemployment are advanced to the National Credit Fund for the
departments and communes. The amounts to be repaid annually in
respect of these advances are calculated at a rate fixed from time to time ;
the whole amount must be paid off within 30 years.
Decree of 24 May 1938
This Decree made some considerable changes in the rules which will
govern the investment of social insurance funds after 1 January 1941,
that is to say, when the clauses concerning the Joint Works Fund cease
to apply.
As from 1 January 1941 the sums available in each invalidity, old-age
and death insurance fund or old-age and death fund will be employed as
follows :
(a) A quarter will be advanced as a loan to the National Credit fund
for the departments and communes, for financing departmental
and communal works and the work of public establishments
administered by these bodies;
(b) A quarter will be invested, by decision of the Governing Body
of the fund or of a committee of the Governing Body with powers
from it, in the form of loans to departments, communes and public
establishments for financing their work;
(c) A quarter will be invested directly by the Deposit and Trust
Fund ;
(d) A quarter will be invested by the Deposit and Trust Fund in
securities selected by the Governing Body of the insurance fund
or by a committee of the Governing Body with powers from it.
The assets of the Regional Federations will continue to be directly invested as formerly, half being invested directly by the Deposit and Trust
Fund and the other half invested through it in securities selected by the
Governing Body of the Regional Federation or by a committee of the
Governing Body with powers from it. Investments made at the suggestion of the Regional Federations must be approved either by the
National Credit Fund for the departments and communes in the case
of loans to departments, communes and public establishments administered by them, or by the Governing Body of the General Guarantee
Fund (or a committee having powers from it) in the case of investments
other than those mentioned above and other than investments in Government securities, the Autonomous Amortisation Fund or negotiable
securities quoted on the Paris Stock Exchange.
RATES OF INTEREST OF INVESTMENTS
Pursuant to the Act of 1930 the rate of interest of investments 1 made
on the initiative of the insurance funds may not be less than a minimum
rate fixed at the beginning of each year by a Decree issued on the recommendation of the Ministers of Finance and Labour. This minimum
ratej which was at first fixed at 3.75 per cent for securities accepted as
1
Calculated in accordance with the rules which are reviewed in the next
section (see p. 260).
254
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
collateral by the Bank of France and at 4.70 per cent, for the other
categories of investment, was raised by the Decree of 2 June 1933 to
4.25 per cent, for securities 'accepted as collateral by the Bank of France
and to 5.25 per cent, for the other categories of investment.
The Decree of 15 May 1934 stipulates that the rate of interest of the
loans which may be granted by the Joint Works Fund is fixed periodically
by an Order of the Ministers of Labour and Finance after consultation
with the National Board of public works to relieve unemployment.
This rate was fixed for the first time on 14 September 1934 at 5.35 per
cent. ; since 1 January 1935 it has remained at 5 per cent.
Pursuant to the Decree of 28 October 1935, the rate of interest on
long and short term investments 1 of the social insurance funds may not
be less than the minimum rates fixed periodically by an Order of the
Ministers of Labour and Finance. This Order also determines a minimum
rate of interest for the investments authorised by way of exception for
the purpose of installing the administrative machinery of the funds. In
the application of these clauses an Order of 14 September 1936,
which applies at the same time to the scheme for commerce and industry
and also to that for agriculture, subjects the rates of interest on investments to the following rules.
(1) For the investments of social insurance funds and their federations
the minimum rates in force are maintained, namely:
4.25 per cent, for securities accepted as collateral by the
Bank of France ;
5.25 per cent, for the other categories of investment.
(2) Short term investments of the social insurance funds and their
federations, when they are made in ordinary Treasury bonds,
must carry a rate of interest at least equal to that of the National
Defence Bonds issued at the same time.
(3) The minimum rate is reduced to 3 per cent, in the case of the
acquisition, construction or equipping of buildings for the purpose of installing the administrative machinery of the funds
or of their federations.
(4) The loans granted by Regional Federations to bodies or establishments for the purpose of carrying out works of social hygiene
and of prevention, must carry a rate of interest at least equal
to 4.50 per cent.
(5) Loans granted by Federations of funds with the authorisation
of the Minister of Labour up to a maximum fixed by Order 2 and
intended for social hygiene and preventive work must bear
interest at not less than 2 per cent.
An Order of 6 February 1937 reduced from 5.25 to 5 per cent, the
minimum rate of interest for the investments of social insurance funds
or their Federations other than those in securities guaranteed by the
Bank of France.
The rate of interest applicable to the annual repayments of advances
from the Joint Works Fund to the National Credit Fund for the departments and communes was fixed at 5 per cent, by an Order of 20 May 1937.
1
2
See footnote on previous page.
See above, p. 252.
255
FRANCE
§ 2. — Statistics of Investments
ACCUMULATION
FUNDS
The amounts of the investments made annually in each category on
behalf of accumulation funds, either on their own initiative or through
the Deposit and Trust Fund, appear in t h e reports published annually
[30, 34, 32]. These same documents contain a detailed description of,
the holdings of the accumulation funds, showing separately:
(1) investments selected b y the funds themselves;
TABLE XIX. —
INVESTMENTS M A D E ON BEHALF OF THE ACCUMULATION
FUNDS BUT SELECTED BY THEM l
Title of securities
held by the Deposit
and Trust Fund
As a t
31 December
1932
As at
31 December
1933
As a t
31 December
1934
As at
As at
31 Dec- 31 December
ember
1936
1935
Miscellaneous securities (nominal value in thousands of francs)
Bons de la Défense nationale
and Bons du Trésor . . .
670
28,177
41,956 10,000 13,855
Obligations du Trésor 4%
pour cent 1932 (outillage
national)
13,688 14,418 15,665
—
—
Obligations du Trésor 4%
pour cent 1933
9,236
9,672 10,552
—
—
Obligations du Trésor redeemable in 15 years . .
12,664
13,343 14,248
—
—
Obligations sexennales de la
Défense nationale . . . .
1,357
—
—
—
Obligations du Trésor 4 pour
cent 1934
450
450
—
—
—
Obligations du Trésor 5 pour
cent 1935
225
1,225
——
—
Bons du Trésor 7 pour cent
1926
19
—
49
—
Bons du Trésor 4% pour cent
1933 for 10 years
. . . .
3,246
2,285
3,547
—
—
Bons du Trésor 5 pour cent
1933 for 5 years
570
833
1,577
—
—
Bons du Trésor 4 % pour cent
1934
2,591
3,802 10,976
—
—
Bons du Trésor 5 pour cent
1934
2,007
1,578
2,455
—
—
Bons du Trésor 4 pour cent
1935
7,796
9,843
Titres de dommages de guerre 116,795 140,300 145,088 160,903 171,985
Obligations de la caisse autonome d'amortissement . .
3,537
5,169
5,889
6,302
6,471
Carried forward . . .
148,509 187,425 204,995 236,871 249,664
i This table does not include loans to departments and communes or real estate
investments.
256
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE XIX. — INVESTMENTS MADE ON BEHALF OF THE ACCUMULATION
FUNDS BUT SELECTED BY THEM
Title of securities
held by the Deposit
and Trust Fund
As at
31 December •
1932
As at
31 December
1933
(continued)
As at
31 December
1934
As at
31 December
1935
As at
31 December
1936
Miscellaneous securities (nominal value in thousands of francs)
Brought forward . . . 148,509 187,425 204,995 236,871 249,664
Obligations des Postes, Té6,840
7,406
légraphes et Téléphones .
3,245
4,917
8,418
Obligations and Bons du Crédit National
6,302
8,233 10,228 13,500 17,502
Obligations and Bons des
45,216 51,185 55,668
chemins de fer de l'Etat .
Debentures and Bonds of
various railway companies 161,682 237,746 226,822 270,514 303,183
State-guaranteed debentures
of various shipping companies
15,259 16,474 16,559
Bonds issued by Colonies and
Protectorates
10,376 22,195 32,810 41,668 46,981
Loans on the security of Government annuities . . .
25,640 44,778 48,516 52,114 58,516
Crédit foncier bonds . . . .
13,753 23,497 29,034 31,774 34,113
Bonds issued by departments
and municipalities . . . .
14,319 21,026 25,605 32,153 37,628
Bons du port autonome du
Havre
180
180
180
Miscellaneous shares . . . .
631
631 ' 3,185
Government stock and foreign bonds guaranteed by
the French Government .
3,720
3,620
400
3,255
3,45.5
Bons de la Caisse nationale de
crédit agricole
561
Total
. . . .
384,227 553,254 649,593 758,089 835,698
" Rentes '
French Government " rentes "
(thousands of francs) . . .
" Rentes " issued by Colonies
or Protectorates (thousands
of francs)
French Government " rentes "
issued in U.S.A. (thousands of dollars)
3,029
4,093
4,495
5,344
7,087
0.8
0.8
0.8
1.1
0.9 .
—
> —
—
6
Securities issued in dollars (nominal capital)
" Messageries maritimes " debentures issued in Canada .
2,200 100,000
98,000
98,000
98,000
257
FRANCE
(2) investments selected by the Deposit and Trust Fund;
TABLE
XX.
—
INVESTMENTS
SELECTED
AND TRUST FUND ON BEHALF
Title of securities
held by the Deposit
and Trust Fund
As at
31 Dec-
As at
31 Dec-
CIL1UCL
pm hpr
1932
AND
MADE
BY
THE
OF THE ACCUMULATION
1933
DEPOSIT
FUNDS *
As at
As at
As at
31 Decem- 31 Decem- 31 December 1934 ber 1935 ber 1936
Various securities (nominal capital in thousands of francs)
Obligations du Trésor
4 y2 pour cent 1932
(outillage national) .
Obligations du Trésor
4 % pour cent 1933 .
Obligations du Trésor
redeemable in 15 years
Bons du Trésor 4 % pour
cent 1933 for 10 years
Obligations de la Caisse
autonome d'amortisseObligations
du
—
66
66
66
66
—
23,919
23,909
23,632
23,534
2,822
3,092
3,247
6,578
6,520
—
3,712
3,712
3,712
3,712
114,772 104,772
104,772
104,712
104,631
285
285
Crédit
Obligations et bons des
chemins de fer de l ' E t a t
Debentures and bonds
of
various
railway
State-guaranteed debent u r e s of various shipping companies . . .
Bonds issued b y Colonies
and P r o t e c t o r a t e s . .
Loans on the security of
Government annuities
^reuìL loncìer JJÖÜUS .
Bonds issued b y d e p a r t ments and municipal-
—
—
—
—
230,761
254,123
273,500
292,929
547,884 469,357
692,196
779,765
831,951
421
62,383
89,861
128,404
50
50
579
643
643
70,775
22,002
90,671
22,904
114,040
22,993
127,911
28,917
137,757
34,895
99
99
99
7,060
7,013
—
Foreign S t a t e loans and
bonds guaranteed b y
t h e F r e n c h Govern-
—
Total
. . . .
—
—
—
5
758,405 949,824 1,282,120 1,446,641 1,572,344
" Reiites " (in thousands of francs)
French G o v e r n m e n t
181
19,450
25,598
25,598
25,135
i This table does not include loans to departments and communes or real estate
investments.
17
258
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
(3) Investments of the National Old-Age Pensions Fund (Social
Insurance Section).
TABLE
XXI.
INVESTMENTS MADE BY T H E NATIONAL OLD-AGE
P E N S I O N FUND
(Social Insurance Section)
At 31
At 31
At 31
At 31
At 31
Decem- Decem- Decem- Decem- December 1932 ber 1933 ber 1934 ber 1935 ber 1936
" Rentes " (in thousands of francs)
Title of securities
—
Net revenue
J 3,510 |
5,125 |
4,607 |
4,144
Number of securities
Obligations de la Caisse autonome de gestion des
bons de la Défense nationale 4i/ 2 %
46,422 46,422
—
46,422 46,632
Bons du Trésor 4 y 2 % 1933 .
—
—
—
—
100
» »
» 5% 1934 . .
—
—
748
1,392
1,392
Obligations du Trésor 4%
1931-1946 (2nd half-year) .
—
—
—
—
458
Obligations du Trésor 4 % %
1932-1947 (1st half-year) .
—
—
—
—
1,000
Obligations du Trésor 4 % %
1932-1942 (2nd half-year) .
—
—
—
•—
117
Obligations P.T.T. 5% redeemable 1928
—
—
—
—
60
Obligations du Crédit national
—
—
219
Obligations de la Ville de
Paris
—
—
—
—
170
Obligations du Crédit foncier
de France
25,008 25,004 25,000 24,995 25,016
Obligations des chemins de fer
de l'Etat
59,918 73,986 151,755 158,344 216,172
Debentures of various railway
companies
378,377 566,031 700,410 823,064 894,036
Loans on the security of Government annuities (Act
of 31 July 1920) . . . . .
290 28,671 33,500 33,614 33,871
State-guaranteed debentures
of various shipping corn47,272 48,874
14,084 24,890 33,820
Obligations du gouvernement
5,328
5,328
général de l'Algérie, 4 % %
—
5,328
5,328
,
Obligations du gouvernement
3,363
3,463
général de l'Algérie, 5 % . .
——
—
State-guaranteed bonds of
2,860
3,073
various colonies
—
—
—
•
—
•
•
—
Loans (amou nt in thousands of francs)
Loans to departments (cost)
Railway annuities guaranteed
by State (cost)
. . . . .
Various loans
.
General Labour Fund (cost) .
77,557 124,700 121,802 118,762 115,572
44,142 175,764 172,328 168,703 164,878
—
—
108,112 410,713 673,715
259
FRANCE
THE GENERAL GUARANTEE FUND
The investment operations of the General Guarantee Fund and the
composition of its hoJdings are described in its annual report [33]. The
investments of this fund amounted on 31 December 1936 to 2,749,379
thousands of francs, distributed as shown in table XXII.
TABLE XXII.
INVESTMENTS OF THE GENERAL GUARANTEE
FUND
AT 31 DECEMBER 1936
Sums invested Percentage
per
(in thousands
category
of francs)
Nature ol holdings
Transferable
securities
Short-term securities
French Government securities
French Government securities issued abroad
State-guaranteed
debentures
of
100,000
484,195
21,078
668
961
shipping
Departmental and municipal loans
. . . .
Debentures of "Crédit foncier"
Railway securities
Total transferable s e c u r i t i e s . . . .
Loans
5,762
2,246
687
1,257,669
1,873,266
68.14
Loans to public undertakings
Various loans
Loans to colonies
,, ,, communes
,, ,, departments
72,836
35,265
164,803
74,238
188,181
271,722
Total loans
807,045
29.35
69,068
2.51
Read estate
Grand total
' 2,749,379
100
JOINT WORKS FUND
The Joint Works Fund received the following sums :
From June
During
to
During
December
1935
1936
1934
in millions of francs
From the accumulation funds . . . .
• From the National Old-Age Pensions
Fund
From the General Guarantee Fund . .
Total
414
889
703
183
231
828
272
146
1,307
266
969
260
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
At 31 December 1936 the Fund had granted loans:
To departments, communes and. public establishments (and miscellaneous loans) amounting in all to 1,890 million francs;
To the State for a total of 989 million francs.
At the same date 28.5 million francs had been invested in short term
securities and there was a credit balance of 197 million francs.
RATE OF INTEREST YIELDED
The average rate of interest on the investments is calculated according
to the purchase price and by taking into account the receipt of eyentual
premiums on redemption and the particular factors relating to each
investment. The interest on intercalated and temporary investments
of which the duration does not exceed one year are not taken into
account.
The application of these rules respectively to the two broad classes
of investments, which have already been distinguished, produces the
following results:
Investments made on the initiative
of the Deposit and Trust Fund
During the financial year 1931-1932
During the financial year 1933 . .
Existing at 31 December 1933 . .
Investments made at the instance of the funds
(except direct investments such as:
purchase of buildings, loans, etc.)
During the financial year 1931-1932
During the financial year 1933
Existing at 31 December 1933
Average rate of
interest yielded
(per cent.)
5.18
5.80
5.46
5.10
6.15
5.36
§ 3. — Accounting, Statistics and Financial Control
The rules relating to the accounting and statistics of social insurance
funds, which were defined first of all by a Decree of 25 July 1930, subsequently underwent axertain number of modifications. The rules
applied
as from 1 September 1936 were formulated in a new Decree 1 relating
to accounting, dated 29 July 1936 [22]. Its principal provisions are
reviewed below, with special reference to those concerning the invalidity,
old-age and death funds, the regional federations and the General
Guarantee Fund ; particular attention is paid to the rules which define
the technical accounting of the insurance against old age and death and
of the invalidity insurance.
RULES FOR ACCOUNTING OF ALL THE FUNDS AND FEDERATIONS
The governing body of each fund or federation appoints a standing
management committee which shall include at least two members of
1
The provisions concerning invalidity, old age and death were extended
almost unchanged to the agricultural insurance scheme by Decree of 26 January
1937.
FRANCE
261
the governing body and which shall be entrusted with the audit of the
accounts. This committee must present to the governing body a report
on the financial working during the past year and on the position of
the fund or federation at the end of the year, before the balance-sheet is
submitted to the Minister of Labour. Moreover the committee must at
least once a year make a surprise examination of the fund and the
accounts.
The accounts of the social insurance funds and of the federations
show all the items of receipt and expenditure and enable the allocation
of the surplus receipts to be determined. They are drawn up in such a
way that the amount of the expenditure relating to each benefit may
be isolated. They take account only of financial operations actually
affected and of credits and debits resulting from liabilities definitely
incurred at the date at which the accounts are made up.
RULES FOR ACCOUNTING OF THE INVALIDITY, OLD-AGE AND DEATH
INSURANCE FUNDS
The accounts of the insurance funds for invalidity, old-age and death
include, on the one hand, the documents relating to the financial transactions and, on the other hand, the documents for use in investigating
the actuarial position of the fund, in fixing the bases of its scales and
in defining the rights of each member. The documents which relate to
the items of receipt and expenditure and which enable the allocation of
the surplus receipts to be determined constitute the financial accounting
of the fund. The documents which are used for the determination of the
rights of each member, for fixing the bases of the scales and for investigating the actuarial position of the fund constitute the technical accounting.
Technical Accounting of the Funds effecting Insurance against Old Age
and Death
The technical accounting of the funds effecting insurance against old
age and death include compulsorily:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
an alphabetical index of members compiled on cards;
the individual accounts of insured persons;
a roll-book of annuities and old-age pensions;
a roll-book of orphans' pensions;
a card index of the pensions and annuities in force;
a book of actuarial reserves;
a list of attachments.
The individual accounts of insured persons are kept in the form of
folios classified according to year of birth under the four headings:
contributors, pensioners, deceased and exitants. These individual
accounts show, opposite the contributions, the interest due and the
actuarial reserves which the fund has actually received during each
year, the corresponding portions of annuity calculated according to
the scale in force at the moment of crediting the amount. They must
set forth the total amount of the annuities to be borne by the fund and
the total amount of the repayable lump sums to be repaid in case of
death. The individual accounts of pensioners must show, as regards
the amount of the actuarial reserves transferred by other funds, the
262
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
name of the funds concerned and the date of transfer. The individual
accounts of pensioners whose pensions are paid by another fund are
classed under the heading " exitants " ; these individual accounts must
show the amount of the actuarial reserves transferred to the fund which
pays the pension, the name of that fund and the date of transfer; the
amount of the actuarial reserves so transferred and the amount of the
corresponding annuities are determined in accordance with rules laid
down by Order. The individual accounts of deceased persons must
show the date of decease, the amount of the lump sums paid to dependants of the insured person and the date of the payment.
Entries in the roll-book of annuities and old-age pensions are made in
chronological order according to the dates on which the annuities and.
pensions were awarded. The same applies to the roll-book of orphans'
pensions.
The book of actuarial reserves is compiled at each valuation which
necessitates the calculation of new actuarial reserves. The social insurance annuities and the workers' and peasants' pensions are calculated
separately. Furthermore, a distinction is made between the annuities
in course of payment and the annuities which are in the process of being
constituted.
For the annuities in course of payment, insured persons are grouped
according to year of birth. For each group so formed the book of actuarial
reserves shows:
(a)
(b)
(c)
(d)
(e)
the total number of beneficiaries;
the total amount of annuities;
the total amount of repayable capital sums;
the present value of an immediate annuity of one franc;
the actuarial reserve corresponding to the total amount of the
annuities;
(/) the actuarial reserve for a sum assured of one franc payable on
death;
(g) the actuarial reserve for the repayable capital sums.
The reversionary annuities (with reversion to the surviving widow)
are calculated separately.
For the annuities in course of acquisition, the insured persons
are grouped according to year of birth and also according to the age
fixed for entry into pension. For each group so formed the book of
actuarial reserves shows:
(a)
(b)
(c)
(d)
(e)
(/)
the total number of members;
the total amount of eventual annuities;
the total amount of repayable capital sums;
the present value of a deferred annuity of one franc;
the actuarial reserve for the annuities;
the actuarial reserve for a whole-life insurance of one franc
payable on death;
(g) the actuarial reserve for the repayable capital sums.
Technical Accounting of the Funds effecting Insurance against Invalidity
The technical accounting of the funds effecting insurance against
invalidity include compulsorily:
(1) a roll-book of invalidity pensions;
FRANCE
263
(2) a list of the individual accounts of persons in receipt of invalidity
pensions;
(3) a book of capital values of invalidity pensions in course of payment.
Entries in the roll-book of invalidity pensions are made in chronological order according to the dates on which the pensions were awarded.
The individual accounts of persons in receipt of invalidity pensions
are kept at the offices of the fund and are classed under six headings:
pensions due by the federation; pensions due by the invalidity
insurance fund; pensions taken over by the old-age pension fund;
suspended pensions; cancelled pensions; deceased pensioners. The
individual accounts of pensioners whose pension is payable by the
federation or by the invalidity insurance fund are classified according
to the year of birth of the pensioner and also according to the year in
which he became an invalid.
The book of actuarial reserves is compiled at each valuation which
necessitates the calculation of new capital vaiues. The pensioners
are grouped according to year of entry into pension and for each group
so formed the book of capital values shows:
(a) the total number of pensioners;
. (b) the total amount of the invalidity pensions, excluding increases
for family maintenance expenses;
(c) the capital value of an invalidity annuity of one franc;
(d) the capital value corresponding to the total invalidity pensions granted to the pensioners in the group.
The percentage addition to be made to the capital value to take
account of the increases for family maintenance expenses is fixed periodically by ministerial Order.
The Minister of Labour constructs the table of cessation of invalidity
pensions,1 and also the scales corresponding to the various rates of
interest which give the capital value of an invalidity annuity payable
to age 60 or until the pension is cancelled on account of death or return
to health.
Provisions Com.m.nn to Insurances against Invalidity. Old Age and Death
Every year a balance-sheet is drawn up showing the assets and
liabilities of the fund as at 31 December. This balance-sheet is
submitted, before 1 July of the following year, to the scrutiny of
the Minister of Labour.
The balance-sheet reveals the factors which enable the apportionment
of the assets and the determination
of the average rate of interest of the
investments to be made 2. Buildings belonging to the fund are included
in the assets of the balance-sheet at a figure which may not in any case
exceed the net cost as shown by the expenditure on purchase and on
works of construction and improvement, excluding the cost of upkeep.
As à counterbalancing item to the figure appearing on the assets side,
the funds must include in the liabilities a reserve for the amortisation
1
For the choice of the rate of interest on which the amount of the capital
values
is to be calculated, see Chapter III, § 3, p. 224.
2
For the calculation of the average rate of interest on investments, see the
preceding section, p. 260.
264
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
of buildings, which increases by one-hundredth of the net cost thereof
for each complete year passed. The annuities and securities in the list
of investments are valued both at the purchase price and at the Paris
Stock Exchange market price for the last day of the year of account.
If the total produced by the valuation at the Stock Exchange market price
for the last day of the year of account is less than the total purchase
price, the difference is carried to the expenditure side of the " Profit and
Loss Account " (the difference of the preceding year being carried to the
receipts side of the same account). In order to determine the rate of
interest yielded by investments in buildings account is taken of the
average net income received since purchase when this took place within
less than five years, otherwise account is taken of the average net
income of the last five years. The net annual income is obtained by
deducting from the total rents and other charges paid by the tenants,
on the one hand the expenditure on management and the costs paid by
the fund and on the other hand an allowance for depreciation equal to
one per cent, of the net cost of the building. • The rate of interest is
found by dividing the average net income by the net cost of the building.
The balance-sheet must show among the liabilities a special reserve
for the insurance against death, which increases each year by one-fifth
of the total expenditure of the insurance against death during the last
financial year until it becomes equal to the total expenditure of the
insurance against death in the last financial year.
To the balance-sheet relating to each valuation are annexed separate
tinancial accounts for the insurance schemes against invalidity, old age
and death which show on the one hand the variations in the assets
and liabilities and on the other hand the total receipts and expenditure
since the date of the preceding valuation.
The funds which effect insurance against invalidity must carry to*the
credit of the " invalidity insurance " account half the annual profits
derived from the insurances against old age and death whenever these
two insurance schemes have disclosed profits at the end of the preceding
financial year. This duty must be carried out within one month following the date at which the valuation of the fund receives the approval
of the Minister of Labour. The funds which do not effect insurance
against invalidity and whose previous balance-sheet discloses a surplus
of assets must pay the half of the annual profits in the financial accounts
to the invalidity insurance fund to which their members are attached.
This payment must be made within three months following the date at
which the balance-sheet of the fund receives the approval of the Minister
of Labour.
RULES FOR ACCOUNTING OF REGIONAL FEDERATIONS
The Regional Federations open the following six general accounts in
their books : an " invalidity " account for the payment of cost of treatment of invalids and invalidity pensions ; a " guarantee " account and
an " equalisation " account; an account for " social hygiene, prevention
and control " ; a " revenue " account and an " administration " account.
Sums collected in respect of the exceptional levy on the surplus receipts
of assessment funds are credited to an invalidity reserve fund. Regional
Federations close their books at 31 December in each year, and submit
to the Minister of Labour for approval before 31 March a balancesheet and a financial account showing the total of the receipts and expenditure since the date of the preceding balance-sheet. They also draw
265
FRANCE
up a statement of the negotiable securities, loans and properties held
by them at the date of the balance-sheet.
The technical accounting of the Regional Federations include compulsorily:
(1) a roll-book of invalidity pensions;
(2) a list of the individual accounts of persons in receipt of invalidity
pensions ;
(3) a list of attachments.
RULES FOR ACCOUNTING OF THE GENERAL GUARANTEE FUND
1
It was mentioned already that the two funds managed by the General
Guarantee Fund contain a number of different items of income and
expenditure. It will therefore be realised that it is impossible to give
a brief summary of the regulations concerning the books and accounts
of the General Guarantee Fund. It must suffice to mention that the
Director of the Fund is required :
(1) to submit annually to the members of the governing body an
estimate of the probable income and expenditure for all the funds
and accounts for which he is responsible during the following
year;
(2) to submit a general report [33] annually on the operations of the
General Guarantee Fund, together with;
(a) a general balance-sheet showing the situation of the different
funds and special accounts at 31 December;
(b) a return drawn up in accordance with the latest known
statistics and showing, for the Augmentation Fund, the
actuarial estimates of the probable charges for the following
30 years.
These documents are submitted to the governing body along with
the report of the chief accountant; they are then transmitted to the
Minister of Labour and the Minister of Finance with the comments of
i l . .
•
1
J„
tue guvernuig ¿>uu\.
R U L E S RELATING TO STATISTICS
The old-age insurance funds submit to the Minister of Labour every
year, before 1 July, a statement showing in respect of the penultimate
year:
(1) at each age, the number of individual accounts opened in the
name of insured persons entitled to a pension:
(a) who were living on 1 January,
(b) whose pension was awarded during the year,
(c) who died during the year,
(d) who were living on 31 December;
1
These were laid down by Decree of 1 January 1.937.
266
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
(2) at each age, the number of individual accounts opened in the
name of insured persons aged less than 60 years:
(a)
{b)
(c)
(d)
(e)
who
who
who
who
who
were living on 1 January,
were living on 31 December,
died during the year,
became members of the fund during the year,
ceased membership of the fund during the year.
The invalidity insurance funds submit to the Minister of Labour each
year, before 1 July, a statement of insured persons entitled to invalidity pensions which have been in payment for not more than five years
and showing in respect of the preceding year:
(a) the distribution according to age and duration of pension, of
invalids living on 1 January;
(b) the distribution according to age of invalids whose existing
pension has been in payment for five years and has been taken
over during the year by the invalidity insurance fund;
(c) the distribution, according to age and original year of entry on
pension, of invalids whose pension, which had been suspended,
has been reinstated during the year;
(a) the distribution according to duration of pension of invalids who
attained age 60 during the year;
(e) the distribution, according to age and duration of pension, of
invalids whose pension has during the year been cancelled by
death or suspended or cancelled by reason of their return to
health;
(/) the distribution, according to age and duration of pension, of
invalids living on 31 December.
The Regional Federations submit to the Minister of Labour each
year, before 1 July, a statement showing for the preceding year:
(a) the distribution, according to age and duration of pension,
of invalids living on 1 January whose pensions are paid by
them;
(b) the distribution according to age of invalids who entered on
pension during the year;
(c) the distribution, according to age and original year of entry on
pension, of invalids whose pension, which had been suspended,
has been reinstated during the year;
(d) the distribution according to age of invalids whose existing pension
has been in payment for five years and has been taken over by an
invalidity insurance fund during the year;
(e) the distribution, according to age and duration of pension, of
invalids whose pension has during the year been cancelled by
death or suspended or cancelled by reason of their return to
health;
(/) the distribution, according to age and duration of pension, of
invalids living on 31 December whose pensions are paid by
them.
FRANCE
267
FUNDAMENTAL PROVISIONS DEALING WITH THE FINANCIAL CONTROL OF
SOCIAL INSURANCE FUNDS AND THEIR FEDERATIONS
The social insurance funds and Regional Federations function under
the double control of the Minister of Labour and the Finance Minister.
In the first place, the Minister of Labour exercises control over the
documents which relate particularly to the valuations which the funds
make at the end of a year. The control of these valuations, entrusted
to the Department for Accounting, Statistics and Actuarial Technique
(Direction de la Comptabilité des Assurances, de la Statistique et de
l'Actuariat), allows first of all the elimination of mistakes and administrative errors. It also gives prominence to questions, which have not
been correctly understood, and points on which the regulations have not
been observed, and thus gives the central administrative authority
the opportunity of imparting to the funds the supplementary instructions
which they need. Moreover, the care devoted to the presentation of
the valuations and the rapidity with which they are submitted give
the central administrative authority indications which enable it to direct
the attention of its inspectors toward those organisations in respect of
which an investigation on the premises is particularly urgent.
The inspectors and assistant inspectors carry out their investigations
on the premises. They are obliged to advise the chairman of the board
of management of the fund, society or federation, before beginning
their work. The agents, officials and accountants of the fund must
allow the inspectors access to the accounts and lists of assets and must
show them the investments of every type which the fund may be holding,
as well as the vouchers, books, registers, correspondence and other
documents needed to give a complete insight into the administration of
the fund.
The control exercised by the Finance Minister includes, on the one
hand, a constant supervision by the local Treasury officials (paymaster
generals and Treasury collectors) and on the other hand occasional
inspections by Treasury inspectors.
The supervision by the local Treasury officials is constant. Every
month the various institutions must submit to them a copy of their
balance of account. These officials are also invited at least once a year
to carry out an inspection on the premises. Every investigation carried
out on the premises by the Treasury collector must be followed by a
report submitted to the accountant, to the chairman of the board of management and to the managing director of the fund concerned, and a
summary of the report in duplicate is sent through the official channels
to the Public Accounts Department.
In addition, Treasury inspectors may be sent out on a commission of
investigation and control in respect of a particular institution indicated
by the Finance Minister. In these cases investigation is necessarily
much more detailed and extends over all the operations of the fund.
The Treasury collectors are entrusted with the duty of ensuring that the
irregularities discovered by the Treasury inspectors are put right.
268
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
BIBLIOGRAPHY
I. — Parliamentary Documents
1. Projet de loi sur les assurances sociales, présenté au nom du Président de la
République française (Chambre des députés, I 2 m e législature, session de
1921, n° 2369).
2. Rapport au nom de la Commission d'assurance et de prévoyance sociales
(Chambre des députés, 12 m e législature, session de 1923, n° 5505).
3. Rapport au nom de la Commission de l'hygiène, de l'assistance, de l'assurance
et de la prévoyance sociales (Sénat, année 1925, session ordinaire, n° 435).
4. Deuxième rapport supplémentaire au nom de la Commission de l'hygiène,
de l'assistance, de l'assurance et de la prévoyance sociales (Sénat, année
1926, session extraordinaire, n° 628).
5. Avis au nom de la Commission des finances (Sénat, année 1927, session
ordinaire, n° 213).
6. Rapport au nom de la Commission d'assurance et de prévoyance sociales
(t. I : Etude générale, et t. II : Prestations pour la maladie, la maternité et
l'invalidité) (Chambre des députés, 13 m e législature, session de 1928,
n° 5496).
7. Avis au nom de la Commission des finances (Chambre des députés, 1 3 m e
législature, session de 1928, n° 5727).
8. Rapport au nom de la Commission de l'hygiène, de l'assistance, de l'assurance
et de la prévoyance sociales (Sénat, année 1929, 2 m e session extraordinaire,
n° 750).
9. Avis au nom de la Commission des finances (Sénat, année 1930, session
ordinaire, n° 16).
10. Rapport supplémentaire au nom de la Commission de l'hygiène, de l'assistance, de l'assurance et de la prévoyance sociales (Sénat, année 1930,
session ordinaire, n° 37).
11. Rapport au nom de la Commission d'assurance et de prévoyance sociales
(t. I: Etude générale, et t. I I : Prestations pour la maladie, la maternité,
les charges de
famille, les soins aux invalides et le décès) (Chambre des
députés, 14 r a e législature, session de 1930, n° 3187).
IE — Legislative Texts
12.
13.
14.
15.
16.
17.
18.
19.
20.
Act of 5 April 1928. L. S.\ 1928, Fr. 9.
Act of 30 April 1930. L. S., 1930, Fr. 5.
Finance Act of 28 February 1934. L. S., 1934, Fr. 5.
Decree of 15 May 1934. L. S., 1934, Fr. 5.
Decree of 30 June 1934. L. S., 1934, Fr. 5.
Decree of 16 July 1935. L. S., 1935, Fr. 8.
Decree of 28 October 1935. L. S., 1935, Fr. 12.
Decree of 30 October 1935. L. S., 1935, Fr. 13.
Décret portant règlement général d'administration publique pour l'application du décret-loi du 28 octobre 1935. Journal officiel, 22 March 1936.
21. Décret portant règlement général d'administration publique pour l'application du décret-loi du 30 octobre 1935. Journal officiel, 25 March 1936.
1
L. S. = Legislative Series of the International Labour Office.
269
FRANGE
22. Décret du 29 juillet 1936 sur la comptabilité des caisses d'assurances
sociales et de leurs unions. Journal officiel, 10-11 August 1936.
23. Decree of 14 June 1938. L. S., 1938, Fr. 7.
24. Decree of 15 June 1938. L. S., 1938, Fr. 10.
III. — Administrative
Documents
25. Table de mortalité de la Caisse nationale des retraites pour la vieillesse.
Notice et tableaux. Paris, 1905.
24. Tarifs d'assurance-vieillesse. Capitaux de couverture des pensions d'invalidité. 2 m e édition. Paris, Imprimerie nationale, 1931.
27. Tarifs d'assurance-vieillesse. Table P.M.F. 1931. 3 m e édition. Paris,
Imprimerie nationale, 1937.
28. " Rapport du ministère du Travail sur l'application de la loi des assurances sociales (statistiques du 1 e r juillet 1930 au 31 décembre 1932)"
(Journal officiel, 8 March 1934).
29. " Rapport du ministère du Travail sur l'application de la loi des assurances
sociales (statistiques du 1 e r janvier 1932 au 31 décembre 1933) "
(Journal officiel, 12 March 1935).
30. " Rapport du ministère du Travail sur l'application de la loi des assurances
sociales (statistiques du 1 e r janvier 1933 au 31 décembre 1934) "
(Journal officiel, 1 March 1936).
31. " Rapport du ministère du Travaile r sur l'application de la loi des assurances sociales (statistiques du 1 janvier 1934 au 31 décembre 1935) "
(Journal officiel, 18 April 1937).
32. " Rapport du ministère du Travaile r sur l'application de la loi des assurances sociales (statistiques du 1 janvier 1935 au 31 décembre 1936) "
(Journal officiel, 2 December 1938).
33. Rapports concernant le fonctionnement des services de la Caisse générale
de garantie.
34. Rapports de la Commission de surveillance de la Caisse des dépôts et consignations.
IV. — Studies
35. L'assurance obligatoire contre l'invalidité en Allemagne. Recueil de documents sur la prévoyance sociale (Direction de l'assurance et de la prévoyance sociales). Berger-Levrault & C le , éditeurs, 5, rue des Beaux-Arts,
Paris. 1905.
36. Bulletin de la Statistique générale de la France, t. XVII, 1927-1928, pp. 415441. Librairie Félix Alean, 108, Boulevard S*-Germain, Paris.
37. Bulletin de la Statistique générale de la France, t. XXV, fase. IV, 1936.
Librairie Félix Alean, 108, Boulevard S'-Germain, Paris.
38. J. FERDINAND-DREYFUS: Les prévisions statistiques et financières des
assurances sociales. Les presses universitaires de France, 49, Boulevard
S'-Michel, Paris. 1923.
39. E. FLEURY: Commentaire pratique et critique de la loi du 5 avril 1928
sur les assurances sociales. Librairie du Recueil Sirey, 22, rue Soufflot,
Paris. 1929.
40. F. NETTER: " Etude de démographie ouvrière d'après les statistiques d'assurances sociales". Journal de la Société de statistique de Paris, December
1935. Librairie Berger-Levrault, 5, rue Auguste-Comte, Paris.
GERMANY
Invalidity, Old-Age and Widows' and O r p h a n s '
Insurance for Workers
CONTENTS
Page
Part I
1891-1914
INTRODUCTION
•
CHAPTER I : Demographic Estimates, Bases and Experience
1.
Biometrie Tables
Cessation of Old-Age Pensions
Mortality and Cessation Rates for Invalid Pensioners . . .
Mortality of Healthy Persons and Validity Tables . . . .
Probability of becoming Invalid
Sickness
Probabilities relating to Marital Status and to Survival of
Dependants
•
Distribution of Wives of Insured Men in Categories . . . .
Distribution of Widows of Insured Men in Categories . . .
Difference in Age of Husband and Wife
Data relating to Children
2. Insured Population
Estimate of the Initial Insured Population
Subsequent Estimates of the Insured Population . . . .
Estimates of the Number of Entrants into Insurance
Each Year
Estimate of the Annual Number of Exits from Insurance .
Experience
3. Number of Beneficiaries
Table of Symbols introduced in Chapter I
CHAPTER I I : Financial Estimates, Bases and Experience
1. Contributions
Wage Classes and Rates of Contribution
Calculation of the Present Value of Contributions . . . .
Experience
2.
State Aid
Calculation of the Present Values of Individual Supplements
and Grants
Experience
277
278
278
278
279
285
297
301
301
305
309
312
313
316
317
317
319
321
322
322
324
326
326
326
327
329
329
330
330
272
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Page
3.
Benefits
Conditions of Award and Amount of Benefit
Invalidity Pensions
Old-Age Pensions
Payments to Survivors
Repayment of Contributions
Calculation of Present Values of Invalidity Pensions . . .
Unit Invalidity Pension in the Course of Payment . . .
Invalidity Pension in Course of Acquisition
CapitalValuesof thelnvalidity Pensions awarded Each Year
Calculation of Present Values of Old-Age Pensions . . . .
Unit Old-Age Pension
Capital Values of Old-Age Pensions awarded Each Year
Calculations in Respect of Repayments of Contributions .
Calculation of Present Values of Widows' Pensions and
Allowances
Calculation of Present Values of Orphans' Pensions and
Allowances
Experience
4. Other Expenditure
Administration Expenses and Cost of Medical Aid . . . .
331
331
331
334
335
336
337
337
339
345
346
346
348
349
Table of Symbols introduced in Chapter II
366
CHAPTER I I I : Financial
1.
System
Calculation of Average Premiums in the Preparatory Investigations
General Average Premiums
In respect of the Initial Insured Population
In respect of Future Entrants . . .
In respect of Present and Future Insured Persons together
Average Premiums for a Fixed Period
Average Premiums for the Normal Period
2. Average Premiums and Annual Estimates calculated as at
Uanuaryl900
Present Value of Cost of Benefits
,
Invalidity and Old-Age Pensions in Course of Payment . .
Invalidity Pensions in Course of Acquisition
Old-Age Pensions in Course of Acquisition
Repayments of Contributions
Average Premiums and Actuarial Balance-Sheet. Comparison of Various Premiums. Annual Estimates . . . .
j
352
356
363
364
364
369
370
370
370
371
371
372
374
376
376
376
378
379
380
380
3.
General Average Premium as at 1 January 1910
Rate of Contribution in each Wage Class
State Charge
383
384
384
4.
Actuarial Balance-Sheet as at 1 January 1914
In respect of the Insured Population on 1 January 1914 . .
In respect of the Annual Crop of New Entrants
In respect of the Total Annual Number of Exits
Financial Equilibrium
384
384
385
385
386
273
GERMANY
Page
5.
Financial Organisation of the Insurance Institutions
6.
Experience
. . . . 387
.
Table of Symbols introduced in Chapter III
CHAPTER
IV: Financial
389
390
Administration
392
1.
Investment of Funds, Statutory Provisions and Regulations
392
2.
Statistics of Investments
Composition of the Accumulated Funds
Interest Yield
393
393
394
3.
Actuarial and Financial Control. — Statistics
Actuarial and Financial Control
Statistics
.
BIBLIOGRAPHY
395
395
395
396
I. Legislative Texts
II. Reichstag Documents
III. Administrative Documents
IV. Studies
396
396
397
397
I N D E X OF T A B L E S
I.
II.
Rates of Cessation of Old-Age Pensions
General Mortality and Mortality of Pensioned Railway
Employees
III. Cessation of Invalidity (1891-1897 Table, common to Both
Sexes)
IV. Cessation of Invalidity (1906 Table, common to Both
a.
«\
OCAC&J
278
280
282
QQc
«vv
V. Mortality of Invalids
289
VI. Validity Table and Mortality Rates of Healthy Lives
(Males)
290
VII. Validity Table and Mortality Rates of Healthy Lives . 293
VIII. Validity Table (Females)
295
IX. Mortality of Healthy Lives
296
X. Rates of becoming Invalid
298
XI. Rates of becoming Invalid (Probabilities in 0.00001). . . 300
XII. Survivorship Factors for Widows and Dependants (Insured
Men)
302
XIII. Probabilities relating to Marital Status and Survivorship
of Dependants (Insured Women)
304
XIV. Distribution of Wives of Insured Men by Age and Category
308
XV. Probabilities for subdividing Widows of Insured Men in
Categories
310
18
274
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Page
XVI.
XVII.
XVIII.
XIX.
XX.
XXI.
XXII.
XXIII.
XXIV.
Difference in Age of Husband and Wife
Life Table for Children (Both Sexes combined)
Age Distribution of Children according to Age of Father
Probabilities t\x that an Insured Man aged a; is the Father
of a Child under 15 Years of Age
Total and Insured Populations (from the Industrial Census
of 12 June 1907)
Insured Population (as at 1 January 1914)
Movement of the Insured Population during 1914 (Estimates in Thousands)
Total Number of Pension Beneficiaries: Experience . . .
Number of Lump-sum Payments made as Repayments of
Contributions
Present Value a.x
of a Unit Contribution payable Weekly
at 3.5 Per Cent. Interest
XXVI. Weekly Contributions received Each Year by Regional
Institutions
XXVII. State Grants — Experience (in thousand Marks) . . . .
XXVIII. Present Value of an Invalidity Pension in Course of Payment, payable Monthly, with Interest at 3.5 Per Cent.
XXIX. Present Value of an Invalidity Pension in Course of Acquisition, payable Monthly after 4 Years Waiting
Period, with Interest at 3.5 Per Cent
XXX. Present Value of an Old-Age Pension in Course of Acquisition, payable Monthly, with Interest at 3.5 Per Cent.
X X X I . Present Value at Death of Husband of Right to a Widow's
Pension and Allowance, with Interest at 3.5 Per Cent.
X X X I I . Present Value of the Right to a Widow's Pension and
Allowance in respect of an Invalid or Insured Person
at Any Age, with Interest at 3.5 Per Cent
X X X I I I . (a) Present Value of the Right to an Orphan's Pension
ceasing at Age 15, with Interest at 3.5 Per Cent. .
X X X I I I . (b) Present Value of the Right to an Orphan's Allowance
payable at Age 15, with Interest at 3.5 Per Cent. .
XXXIV. Average Annual Amount of Pensions: Experience (in
Marks)
XXXV. Total Amount paid Each Year in respect of the Various
Benefits: Experience
XXXVI. Administration Expenses and Cost of Medical Aid: Experience
XXXVII. Annual Estimate of Expenditure on the Scheme . . . .
XXXVIII. Financial Results from the Inauguration of the Scheme
until 1913
XXXIX. Distribution of Total Investments
312
313
314
315
318
319
321
323
323
XXV.
328
329
330
338
343
347
355
357
360
361
363
364
365
382
389
394
275
GERMANY
Part II
1924 ONWARDS
Page
INTRODUCTION
399
CHAPTER I : Demographic Estimates, Bases and Experience . . . . . .
1. Biometrie Tables
Invalidity Rates
Rates of Cessation of Invalidity and Old-Age Pensions. . .
Award of Widows' Pensions
Rates of Cessation of Widows' Pensions
2.
Insured Population
Experience
. . . •
3.
Number of Beneficiaries
1927 Estimates
Investigations Preparatory to the 1933 Reform
Experience
'
401
401
401
401
403
404
404
407
408
408
408
410
CHAPTER I I : Financial Estimates, Bases and Experience
413
1.
Contributions . .
Wage Classes and Rates of Contribution
Estimates of Contribution Income
Experience
2.
State Aid
415
3.
Other Receipts
Sums credited as Interest Income
Grants from the Unemployment Insurance Scheme . . . .
417
417
417
4.
Benefits
Conditions governing Award of Benefit
Amount of Benefit
Maintenance of Benefit Rights
Preservation of Rights in Course of Acquisition in the Case
of Transfers between "the Workers' Insurance Scheme and
the Salaried Employees' or the Miners' Insurance Scheme
(Wanderversicherung)
Estimates of the Annual Cost of Benefits
Experience
417
417
418
420
421
422
423
Other Expenditure
Administration Expenses
Cost of Optional Medical Benefits
Contributions to the Miners' Insurance Scheme
Repayments to the Salaried Employees' Insurance Scheme
425
425
42&
426
42&
5.
.
CHAPTER I I I : Financial System
413
413
414
415
427
1.
Tables of Annual Estimates
Estimates of Receipts and Expenditure from 1927 to 1931
Estimate of Receipts and Expenditure from 1929 to 1938 .
427
427
428
2.
Annual Results of the Operation of the Scheme
429
3.
Actuarial Balance-Sheets
430
276
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Page
4.
Consolidation of the Financial Position (Act of 21 December
1937)
Grants from the Unemployment Insurance Scheme . . . .
Supplementary Payments made by the Reich Government
CHAPTER I V : Financial
1.
2.
3.
Administration
432
433
433
434
Investment of Funds. — Statutory Provisions and Regulations
Authorised Classes of Investment. Provisions Peculiar to
Certain Classes
Statistics of Investments
Composition of the Fund
Interest on Invested Funds
Interest Yield
434
436
436
437
438
Statistics. — Actuarial and Financial Control
Statistics
Actuarial and Financial Control
438
438
439
.
BIBLIOGRAPHY
434
439
I. Legislative Texts
II. Parliamentary and Administrative Documents
III. Articles
IV. Books
, . .
439
440
440
441
INDEX OF TABLES
I. Probability of becoming Invalid
II. Rates of Cessation of Invalidity
III. Estimated Movement of Insured Population, 1930-1970 . .
IV. Estimated Annual Number of Beneficiaries
.
V. Number of Beneficiaries: Experience
VI. Age Distribution of Pensioners : Experience
VII. Contributions: Experience
VIII. State Aid: Experience
I X . Total Annual Amount of Benefit Payments made by Institutions
X. (a) Average Monthly Amount of Current Pensions: Experience
(b) Average Monthly Amount of Newly Awarded Pensions:
Experience
XI. Total Amount of Pensions paid Each Year: Experience . . .
XII. Probable Financial Progress from 1927 to 1931
XIII. Probable Financial Progress from 1929 to 1938
XIV. Financial Progress: Experience
;
XV. Balance-Sheet as at 1 January 1933
XVI. Total Amount and Distribution of Investments : Experience .
401
402
405
409
411
412
415
416
423
424
424
425
427
429
430
431
437
PART
I
1891-1914
INTRODUCTION
Compulsory social insurance against invalidity and old age was introduced in Germany by the Act of 22 June 1889 [1]. The Imperial Government tabled a draft Bill in 1887 and the final Bill [4] in 1888. The
latter was laid before the Reichstag on 22 November 1888 and after a
number of amendments became the Act of 22 June 1889, which came
into operation on January 1891. The 1888 Bill was accompanied by
an explanatory statement [5] and a financial memorandum [6] to which
was attached a mathematical appendix [7]. In the course of the debate
in the Reichstag various other memoranda and notes were published
[8, 9,10].
The 1897 [11] and 1899 [14] Bills and the accompanying memoranda
[12, 13, 15, 16] prepared the way for the Act of 13 July 1899 [2], which
came into force on 1 January 1900.
The 1909 Bill [17] and its appendix [18] led up to the fourth book of
the Social Insurance Code [3], by which the benefit of compulsory
insurance was'extended to widows and orphans as from 1 January 1912.
An actuarial analysis [19] of the financial position on 1 January 1914
showed that the contribution scales in force since 1912 were sufficient
and that there was even a surplus, relatively of small importance, of
270 million marks. Thus, up to that date, the financial progress of the
scheme had been within the limits laid down in the actuarial basis.
The war and the monetary depreciation which followed completely
altered this relationship. The accumulated funds disappeared almost
entirely: from 2,105.5 million marks at the end of 1913 they decreased
to 329.6 million RM. at the end of 1924. From the point of view of
actuarial technique, with which this study is concerned, the years 1913
to 1924 must therefore be considered as abnormal and consequently the
examination of this period can hardly serve any useful purpose. Part I
of this study therefore ends at the end of 1913, leaving for Part II
the period beginning with 1924, after the monetary inflation.
CHAPTER I
DEMOGRAPHIC ESTIMATES, BASES AND EXPERIENCE
§ 1. — Biometrie Tables
The tables to which attention will be drawn in this paragraph are
those which have been used directly either in preparatory investigations
or in investigations leading up to amendments made during the operation
of the scheme. A large number of other tables must be disregarded
•which were used for the purpose of making comparisons but were not
finally adopted 1 .
CESSATION OF OLD-AGE PENSIONS
With the help of data obtained during the early years of the operation
of the scheme rates of cessation were calculated applicable to old-age
pensioners who had attained age 70. The data were derived from
278,631 old-age pensions and 25,984 cases of cessation by death, commutation, suspension or other causes and, after interpolation and graduation, the following table of rates of cessation was obtained [13: p. 3579]:
TABLE I.
RATES OF CESSATION OF OLD-AGE PENSIONS
Age
Probabilities
in 0.0001
70 years. . . .
71
»
72
>
73
»
?
74
75
.
76
»
77
>
78
»
79
»
80
»
81
>
s
82
3
83
84
»
85
. . . . . .
692
728
768
817
880
953
1,033
1,123
1,219
1,321
1,429
1,543
1,663
1,789
1,921
2,059
Age
86 years. . . .
87 »
88 »
89 »
90 »
91 »
92 » •
93 »
94 »
95 »
96 »
97 »
98 »
99 »
100 »
Probabilities
in 0.0001
2,203
2,353
2,509
2,671
2,839
3,013
3,193
3,379
3,571
3,769
3,973
• 4,183
4,399
4,621
4,849
1
Information regarding some of these tables and in some cases a partial
reproduction may be found in Nos. 23 to 26 in the Bibliography at the end of
this Part.
279
GERMANY
MORTALITY AND CESSATION RATES FOR INVALID. PENSIONERS
The mortality of invalid pensioners was first calculated by reference
to two tables: a table constructed by Zimmermann 1, based on the
mortality of pensioned German railway employees, and the table of
general German mortality in the period 1871-1881 2. These two tables
are reproduced in table II.
Zimmermann's mortality rates are lower than those of similar tables
constructed for other industries and from age 69 onwards are even below
the general mortality rates. Zimmermann's figures were adopted to.
age 69 and thereafter the general mortality rates were used [6: p. 77-81].
An examination of data obtained during the early years of the social
insurance scheme indicated the need for adopting select cessation rates
for invalid pensioners taking into account the duration of invalidity.
Accordingly attention was given to the substitution for the aggregate
table of mortality in use until then of a double-entry table giving
cessation rates of invalid pensioners according to age and duration of
invalidity.
The first investigations [13: pp. 3580, 3581 and 16: p. 26-29] dealt
with 65,994 cards relating to invalidity pensions which were first awarded
in one of the eleven quarters in the period 1 October 1891 to 30 June
1894. The probabilities of cessation were calculated according to the
age and the number of the quarter in which cessation occurred (quarter 0
being the quarter during which the pension commenced to be paid),
by means of the following formulae:
0EX
4
oI
*
lEx
\&x
—
2
l'-x
i o*x
e^x
rEx
In these formulae,
rlx represents the number of invalids aged x who came under
observation (at the date of the decision establishing title
to pension) during the quarter r.
rEx
represents the number of cessations of pension which occurred
at age x during the quarter r.
1
Über Dienstunfähigkeits- und Sterbensverhältnisse vom Jahre 1884.
1886.
2
Statistisches Jahrbuch für das Deutsche Reich 1928, p. 40.
Berlin,
280
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE II.
GENERAL MORTALITY AND MORTALITY OF PENSIONED
RAILWAY EMPLOYEES
Age
16 years. . .
General
mortality Zimmerrates: total mann's
German
invalid
population mortality
table
rates
1871-1881
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
»
"
»
»
»
»
»
»
»
»
»
»
"
"
»
»
»
»
»
»
0.00451
0.00531
0.00610
0.00685
0.00750
0.00805
0.00853
0.00852
0.00847
0.00848
0.00855
0.00868
0.00885
0.00905
0.00928
o!o0954
0.00984
0.01019
0.01058
0.01101
0.01148
0.01199
0.01253
0.01308
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
"
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
0.01363
0.01418
0.01475
0.01537
0.01605
0.01680
0.01761
0.01848
0.01941
0.02040
0.02145
0.02256
0.02374
0.02501
0.02639
0.02790
0.02956
0.03139
0.03342
0.03568
17
»
n »»
0.1182
0.1141
0.1100
0.1060
0.1020
0.0981
0.0943
0.0905
0.0868
0.0831
0.0795
0.0757
0.0720
0.0685
Age
60 years. . .
61
>
62
63
64
65 .
66
67
68
69
70
71
72
73
nr
0.0640
0.0640 •
0.0640
0.0639
0.0639
0.0639
0.0639
0.0639
0.0633
0.0622
0.0599
0.0583
0.0558
0.0546
0.0530
0.0525
0.0520
0.0516
0.0512
0.0510
0.0503
0.0496
0.0486
0.0485
0.0485
0.0487
0.0489
0.0495
0.0501
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
s
>
)
i
9
Ï
i
S
>
»
>
)
>
»
1
ï
!
»
ï
)
»
>
>
ï
J
)
»
î
)
»
»
»
y
>
}
)
)
3
General
mortality
Zimmerrates: total mann's
German
invalid
population mortality
table
rates
1871-1881
0.03820
0.04100
0.04409
0.04748
0.05118
0.05520
0.05956
0.06429
0.06942
0.07500
0.08108
0.08770
0.09489
0.10267
0.11105
0.12004
0.12965
0.13989
0.15077
0.16230
0.0512
0.0529
0.0550
0.0573
0.0602
0.0629
0.0653
0.0685
0.0715
0.07500
0.08108
0.08770
0.09489
0.10267
0.11105
0.12004
0.12965
0.13989
0.15077
0.16230
0.17448
0.18731
0.20074
0.21467
0.22900
0.24363
0.25846
0.27344
0.28852
0.30370
0.31902
0.33457
0.35047
0.36689
0.38404
0.40217
0.42158
0.44259
0.46560
0.49102
0.51930
0.17440
0.18731
0.20074
0.21467
0.22900
0.24363
0.25846
0.27344
0.28852
0.30370
0.31902
0.33457
0.35047
0.36689
0.38404
0.40217
0.42158
0.44259
0.46560
0.49102
0.51930
281
GERMANY
From these probabilities relating to quarters, annual probabilities
were obtained by the use of the formulae:
a
W = 1 — (1 — ,<7X) (1 — 1<JX) (1 — ,ffx) (1 — ,<XX) ,
*«j+i = 1 — (1 — «o.) (1 — 6cra) (1 — 6crs) (1 —
7<JX)
, etc.
For
in the absence of sufficiently extensive data, use was made of graphic
interpolation. Duration of invalidity was taken into account up to and
including eight years; as from the ninth year the select probabilities
were merged into the general mortality rates for males in the German
table 1871-1881.
The investigations were extended to cover more extensive statistical
material when it became possible to obtain new data from the insurance
institutions. Select probabilities of cessation were then calculated in
the following manner [20].
The observations were limited to a period of k consecutive years and
to the pensions which began to be paid during each year of this period.
For each individual pension the following facts were noted:
(a) its commencement (i.e. the date as from which it began to be paid),
(b) its award (i.e. the date of the decision establishing title to pension),
(c) its cessation whether by death, return to health or other cause,
or because the end of the period of observation was reached.
All these events were grouped in intervals of calendar months for the
first year and of calendar quarters for subsequent years. Pensions
exposed to risk of cessation in a given interval r were taken to be all
those awarded in previous intervals which were still in payment at the
beginning of the given interval. In other words a pension was deemed
to be exposed to risk of cessation only from the end of the interval
during which it was awarded. The probabilities of cessation for each
interval were obtained by dividing by the number of pensions exposed
to risk (as defined above) the number of cessations (other than pensions
which reached the limit of the period of observation), excluding those
which occurred in the same interval as their award. Annual probabilities were deduced directly from the probabilities obtained for each
interval. For the first interval interpolation was used. This process
was applied to all pensions in a quinquennial age group, according to
the age of pensioner at date of award, and the results reproduced below
were deduced by means of graphic interpolation. Selection was assumed
to cover the first ten years of invalidity; as from the eleventh year
recourse was had to the male German table 1871-1881, as in the case
of the preceding investigation.
The following select probabilities were obtained from an analysis
of 274,814 invalidity pensions awarded from 1891 to 1897 and of 78,121
cases of cessation occurring before the anniversary in 1898 of the date
of award:
TECHNIQUE AND FINANCIAL
Mortality
rates for the
total male
population
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Age attained
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coincides
with the
mortality
rate of the
total male
population
ACTUARIAL
Probabilities of cessation of pension during the following
years after date of award of pension
282
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ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Age attained
by the
invalid when
the rate of
cessation
of invalidity
coincides
with the
mortality
rate of the
total male
population
284
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285
GERMANY
The investigations were further extended [21] to cover 444,654 invalidity pensions (311,540 males and 133,114 females) which began to be
paid from 1891 to 1899, that is to say before the amendments to the
scheme introduced in 1899. The cessations were observed from 1891
to 1903 and included 210,482 cases. Calculation was made not only
of select rates for durations not exceeding eleven years but also of
ultimate rates for longer durations of invalidity. Finally, three tables
were published in 1906 in respect of males, females and both sexes
respectively. The table for both sexes combined is reproduced below
(table IV, pp. 287-288); it has become classic in the theory of social
insurance.
For the calculations relating to supplementary benefits awarded to
survivors it was necessary to use a table relating solely to the mortality
of invalid pensioners. Reference was made first of all [18: p. 544]
to the table of the Prussian railway pension fund (1895-1898 experience)
and later [19: p. 32] to the rates—appreciably smaller than these—
in the table of the Prussian and Hessian railways, constructed from the
experience in 1908-1912 of 76,653 years of exposure and 6,128 cases of
death. These two tables are reproduced below (table V, p. 289).
MORTALITY OF HEALTHY
PERSONS AND VALIDITY
TABLES
To obtain mortality rates for healthy persons recourse was had, in the
first preparatory investigations, to an indirect method in which there
was first constructed a " validity table " (Aktivitätsordnung).
For each
age there was calculated the number of survivors, divided into healthy
and invalid lives, out of an initial group of healthy persons at age 16,
by means of the formulae
Ihi ~
fa
— he
1 —
— hi
Jaa T
-L- h\f
hi
k=C + £
where the values of lx were calculated by a continuous process as
follows 1:
£ = C¿ 1 6 (i-f)
C = C v ( l - y )
1 l
+ t
(1 -
a17) , etc.
i6> li7» e*c-> represent the annual rates of becoming invalid.
p. 297.
See below,
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o o o o
o
O
o
O
O
o
v i ^H O» 0 0
t O O » ^H v i l
vil .vii i ß »O
O » t O v i t CO CO
v * t o 0 0 O CSI
CM CM CM CO CO
O
O
o o o o
o
o o o o
o
o o' o
i c o m o o
to oo o v i oo
to rv o» o ^
o o o o
o
o o o o
o
o o o o
O
O
O
v i l t O CT» CO CO
v i l t O 0 0 - r * CO
CO CO CO v i t v i l
o o o
0 0 O v i 0 0 CO
C M J i O ^ C O
•*-! ^ CM CM CM
o
o
^ H ^ « « r l CM CM
CO CT» t O v i CO
CO v i t O 0 0 O
CM CM CM CM CO
CO vît t o CT» CO
CM v i l t O 0 0 ^
CO CO CO CO v i l
0 0 v i l ^ O» 0 0
CO t O CT» * - l v i t
vil vit vît i ß i ß
o o' o o
© ' © ' © ' © ©
o ' o o o" o
o o o o
o
o o o o
o o o o
o o o o
o
o
to to oo o v i
»o to rv o» o
o o' o ' o' o
Age at award
of pension
O
-r*
CT»
v*
co co v i *M er»
O I O O I Ü O
-
O
v i
tO
v i
O
C O C S ^ t Û C f t
O O * »9" t O OO
O
CO
ot
O
CO
O»
CO
• * CO CO v * t o
00 O C M v i tO
CM CO CO CO CO
+
o
CT» CT» CT) CT»
o o o o
Ì
o
CT» O ) O ) O ) CT»
0.4910 0.5190 0.5480
0.5190 0.5480
0.5480
ÍÍ
-
s s s s
0.4910 0.5190 0.5480
0.5190 0.5480
0.5480
288
o
o
CO CO O » t O v i
T * CO v * t O 0 0
CM CM CM CM CM
CO CO v i t t O CT»
O CS] v i t O 0 0
CO CO CO CO CO
o' o' o ' o' o '
o ' o ' o ' o ' o"
»o to r>» oo o»
O r l M W v «
CT» CT» CT» CT» CT»
CO 0 0 v i ^H CT»
• H CO t O CT» v *
• »ii - i t vii «#' » ß
o o' o' o' o
o
00
- i
ȧ
sL
e • • ••
O " r l CM CO v i
.CO 0 0 0 0 0 0 0 0
00 0 0 00 0 0 0 0
I ß t o C-v. 0 0 CT»
CT» CT» CT» CT» CT»
o
289
GERMANY
TABLE V. —
Age
1895-1898
Table
of the
Prussian
Railways
Pension
Fund
MORTALITY OF INVALIDS
1895-1898
Table
of the
Prussian
Railways
Pension
Fund
1908-1912
Table
of the
Prussian
and
Hessian
Railways
Pension
Fund
58 years
59
»
60
»
0.082
0.081
0.081
0.0752
0.0749
0.0734
61
62
63
64
65
66
67
68
69
70
»
»
»
»
»
»
»
»
»
»
0.080
0.080
0.080
0.081
0.082
0.083
0.084
0.085
0.087
0.089
0.0712
0.0683
0.0656
0.0637
0.0626
. 0.0628
0.0635
0.0656
0.0682
0.0706
71
72
73
74
75
76
77
78
79
80
»
»
»
»
»
»
»
»
»
»
0.093
0.098
0.103
0.111
0.120
0.130
0.140
0.151
0.162
0.174
0.0733
0.0769
0.0816
0.0875
0.0942
0.1018
0.1101
0.1190
0.1287
0.1390
81
82
83
84
85
86
87
88
89
90
»
»
»
»
"
»
»
»
»
»
0.187
0.201
0.215
0.228
0.242
0.257 •
0.273
0.288
0.303
0.318
0.1500
0.1619
0.1747
0.1886
0.2041
0.2216
0.2415
0.2648
0.2921
0.3237
91
92
93
94
95
96
97
98
"
»
»
»
»
»
»
»
0.333
0.348
0.3610
0.4053
0.4572
0.5163
0.5843
0.6486
0.6923
0.7500
1908-1912
Table
of the
Prussian
and
Hessian
Railways
Pension
Fund
—
16 years
17
»
18
"
19
»
20
»
0.443
0.415
0.386
0.362
0.339
0.1904
21
22
23
24
25
26
27
28
29
30
»
»
»
»
»
»
»'
»
»
»
0.314
0.290
0.270
0.251
0.233
0.220
0.210
0.202
0.194
0.186
0.1895
0.1885
0.1874
0.1862
0.1849
0.1834
0.1817
0.1798
0.1777
0.1754
31
32
33
34
35
36
37
38
39
40
»
»
"
»
»
»
»
»
»
»
0.182
0.179
0.175
0.171
0.166
0.161
0.156
0.151
0.145
0.139
0.1729
0.1699
0.1660
0.1611
0.1551
0.1478
0.1398
0.1315
0.1232
0.1155
41
' 42
43
44
45
46
47
48
49
50
»
»
»
»
»
»
»
»
»
»
0.133
0.128
0.123
0.118
0.114
0.110
0.105
0.102
0.098
0.095
0.1081
0.1011
0.0943
0.0881
0.0830
0.0793
0.0767
0.0750
0.0740
0.0730
51
52
53
54
55
56
57
»
•»
»
»
»
»
»
0.093
0.090
0.088
0.087
0.085
0.084
0.083
0.0720
0.0712
0.0708
0.0710
0.0720
0.0732
0.0745
—
—
Age
—
—
—
—
—
—
19
290
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
On the basis of the following data:
general rates of mortality from the German table 1871-1881,
mortality rates for invalids from Zimmermann's table,
rates of becoming invalid from Behm's table,
there was calculated [5: p. 80 and 6: p. 95] for males the validity table
reproduced in table VI, together with the mortality rates for healthy
lives which are directly deduced therefrom:
TABLE VI. —
VALIDITY TABLE AND MORTALITY RATES
OF HEALTHY LIVES
(Males)
Survivors of an initial group
of 60,657 healthy lives at age 16
Age
Total
Healthy
lives
Invalids
h
r
I*
Probability that
a healthy person
will die without
having become
an invalid
aa
X
16 years
17
»
18
»
19
»
20
»
21
»
22
»
23
»
24
"
25
»
26
»
27
»
28
»
29
»
30
"
31
»
32
»
33
»
34
»
35
»
36
»
37
»
38
»
39
»
40
41
42
43
44
45
46
47
48
49
50
51
52
53
»
»
»
»
»
»
»
"
»
»
»
»
»
»
. . . .
60,657
60,383
60,063
59.696
59,287
58,843
58,369
57,871
57,378
56,892
56,410
55,927
55,442
54,951
54,454
53,949
53,434
52,908
52,369
51,815
51,244
50,656
50,049
49,422
60,657
60,377
60,051
59.677
59,260
58,808
58,326
57,818
57,314
56,815
56,319
55,819
55,316
54,803
54,281
53,747
53,200
52,637
52,057
51,456
50,832
50,184
49,510
48,806
6
12
19
27
35
43
53
64
77
91
108
126
148
173
202
234
271
312
359
412
472
539
616
0.00451
0.00528
0.00609
0.00682
0.00744
0.00798
0.00846
0.00843
0.00838
0.00835
0.00844
0.00851
0.00869
0.00886
0.00908
0.00931
0.00958
0.00986
0.01022
0.01061
0.01100
0.01142
0.01191
0.01237
48,775
48,110
47,428
46,729
46,010
45,272
44,511
43,728
42,919
42,086
41,228
40,343
39,433
38,497
48,073
47,310
46,515
45,688
44,822
43,918
42,968
41,973
40,927
39,828
38,674
37,460
36,184
34,842
702
800
913
1,041
1,188
1,354
1,543
1,755
1,992
2,258
2,554
2,883
3,249
3,655
0.01282
0.01330
0.01376
0.01433
0.01487
0.01554
0.01616
0.01688
0.01762
0.01836
0.01921
0.02007
0.02101
0.02208
•
291
GERMANY
TABLE VI.
VALIDITY TABLE AND MORTALITY RATES
OF HEALTHY LIVES
(continued)
(Males)
Probability that
a healthy person
will die without
having become
an invalid
Survivors of an initial group
of 60,657 healthy lives at age 16
Age
Total
h
54 years . . . .
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
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
"
"
»
»
»
"
»
"
»
»
»
»
»
»
»
»
»
»
"
"
"
.
.
.
.
.
.
.
.
Healthy
lives
Invalids
IXa"
l "X
•
aa
x
q
37,534
36,544
35,524
34,474
33,392
32,276
33,429
31,946
30,390
28,760
27,055
25,279
4,105
4,598
5,134
5,714
6,337
6,997
0.02315
0.02434
0.02557
0.02713
0.02871
0.03064
31,124
29,935
28,708
27,442
26,139
24,802
23,433
22,037
20,620
19,189
17,750
16,310
14,880
13,468
12,085
10,743
9,454
8,228
7,077
6,010
23,432
21,524
19,569
17,582
15,584
13,600
11,651
9,763
7,974
6,312
4,807
3,518
2,456
1,620
1,000
568
292
132
50
15
7,692
8,411
9,139
9,860
10,555
11,202
11,782
12,274
12,646
12,877
12,948
12,792
12,424
11,848
11,085
10,175 .
9,162
8,096
7,027
5,995
0.03270
0.03485
0.03724
0.03977
0.04246
0.04584
0.05009
0.05463
0.06070
0.06873
0.07322
0.07796
0.08318
0.08726
0.09217
0.09561
0.09995
0.10155
0.10275
0.10350
5,032
4,156
3,378
2,700
2,120
1,635
1,236
917
666
474
330
225
150
97
61
38
23
13
7.3
3.9
2.0
0.10400
0.10431
5,035
4,156
3,378
2,700
2,120
1,635
1,236
917
666
474
330
225
150
97
61
38
23
13
7.3
3.9
2.0
3 (3.3)
0 (0.4)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
292 .
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
The calculations were revised [16: p. 30-32] on the basis of a new table
of invalidity and a select table of cessation of invalidity. The principle
of the method remained unchanged, but the values of lx were calculated
from ix and o^+h by the following formulae:
. ë = c i» (i - °f)
t = C k, (l - °-f) + « i» (1 - *M) (l - 3fi)
, etc.
In table VII (p. 293) appear the figures obtained by the second calculation of lx and lx, the sum of which reproduces the column lx, which
had also been used in the first calculation; the last column of this table
gives the probability ç ,aa that a healthy man will die without becoming
invalid, the values Of this probability at each age being derived from
the validity table and the rates of invalidity ix by means of the formula
l
x
A new validity table was constructed for females (table VIII, p. 295)
[18: pp. 539-540] by the same method but oh the following bases:
general mortality rates from the 1871-1881 table for the female
population;
select mortality rates for invalids (females) from the table published
in 1906 *;
rates of becoming invalid from a table constructed on the basis of
data supplied by the workers' insurance scheme between 1900 and
1905 2.
For the calculations relating to benefits awarded to survivors a life
table lx for invalids was. introduced [18: p. 544], together with mortality
rates for invalids, ql, deduced from data collected from 1895 to 1898
by the Prussian railways pension fund.
In a later memorandum [19: pp. 28-30] the indirect method was
entirely abandoned in favour of a direct reference to the mortality
rates for healthy lives produced between 1908 and 1912 by the Prussian
and Hessian railways pension fund. These two series of mortality rates
for healthy lives are reproduced in table IX, p. 296.
1
2
See above, p. 285.
See below, p. 297, and table X, column 5.
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294
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE V I I .
VALIDITY TABLE AND MORTALITY RATES
OF HEALTHY LIVES
(continued)
Survivors of an initial group
of 60,657 healthy lives at age 16
Age
60 y e a r s
' 61
»
62
»
63
»
64
»
65
»
66
»
67
»
68
»
69
»
. . . .
Total
Healthy
lives
'*
raa
31,124
29,935
28,708
27,442
26,139
24,802
23,433
22,037
20,620
19,189
26,464
24,883
23,244
21,565
19,865
18,152
16,421
14,672
12,945
11,272
4,660
5,052
5,464
5,877
6,274
6,650
7,012
7,365
7,675
7,917
0.0292
0.0314
0.0337
0.0363
0.0392
0.0424
0.0455
0.0487
0.0522
0.0562
0.0605
0.0650
0.0704
0.0764
0.0825
0.0889
0.0955
0.1024
0.1098
0.1175
X
Invalids
aa
X
70
71
72
73
74
75
76
77
78
79
"'
»
»
»
»
»
»
»
"
»
17,750
16,310
14.880
13,468
12,085
10,743
9,454
8,228
7,077
6,010
9,680
8,175
6.785
5,527
4,414
3,432
2,595
1,893
1,330
898
8,070
8,135
8095
80
81
82
83
84
85
86
87
88
89
»
»
»
»
»
»
»>
»
»
»
5,035
4,156
3,378
2,700
2,120
1,635
1,236
917
666
474
577
349
196
98
43
16
3
4,458
3,807
3,182
2,602
2,077
1,619
1,233
917
666
474
90
91
92
93
94
95
96
97
98
99
»
»
»
»
»
»
»
»
»
»
330
225
150
97
61
38
23
13
7
4
100
»
. . . .
Probability that
a healthy person
will die without
having become
an invalid
2
—
—
- 7 -
—
—
7J94Ï
7,671
7,311
6,859
6,335
5,747
5,112
330
225
150
97
61
38
23
13
7
4
2
0.1271
0.1334
0.1500
0.1642
0.1809
—
—
—
—
—
—
—
—
—'
—
—
-—
—
—
— -
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Survivors of an initial
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lives at age 16
o
Healthy
Invalids
lives
IO 1
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00 (N -# (N l> 00. IO C> -rH r t
r i ^ M M O O O C O
tOritONCOUOCOrHrHrrt
-^H <N CN *# IO tO 00 Ol ^ < N ^tO^OO^O^CN
r t ^T <-T *H* TH* of c>f
*#tOtOCNCTiCOtO<MOOOO
y
»T¡
z
Healthy Invalids
lives
^
Age
S
Age
I-
cíxTiiooioo^ooNin
«o to o o <û to m io w WÍ
« tO O (O Otf)kO U1) LO iO
OrKNCO^i
OOCOlMOO
IM »# r M M a> i
^toooTHCot
<N" <N" <N" CO" CO" c
oo oo TH r^ w r^ co co toco
o> a i oo o* OÍ M ^ <J"N o
OOrl^t^OilN^tOOOO
(Otow^cocoiNriocr)
IO IO IO IO IO IO IO iO i ß ^
tO O IOff>(N lO 00 ¡N tN tN
tO T^ ^ tO 00 00 CN tO CO O
IO O »# OO M tí? O » í 00 (N
Ot>tOlOlO<t<^CO(NCN
IO IO IO IO IO irt lO »O lO »O
Oiûl>a)OC
lOO^flTNOO
r t co »* io i> »
asûor^toio*
*# ^ »># *J* <i* *
t Û O O r n O r
C^ ^ CM 0 ' 0 > 0
W Oì CO C\ O <
nOOO^O)c
lO^OiO^^-
OniNCOO'ultûrNOOOi
COCOCOCOCOCOCOCOCOCO
onMcoo<i
S
>>
O-rKMCO-^kOtOr-cOai
*3* • ^ *•# * ^ ^J* *
296
ACTUARIAL TECHNIQUE AND FINANCIAL
TABLE IX.
ORGANISATION
MORTALITY OF HEALTHY
LIVES
(Probabilities in 0.00001)
1895-1898
Table
of the
Prussian
Railways
Pension
Fund
Age
1905-1912
Table
of the
Prussian
and
Hessian
Railways
Pension
Fund
16 y e a r s .
17
» .
18
" .
19
» .
20
» .
.
.
.
.
.
372
373
374
375
376
258
21
22
23
24
25
26
27
28
29
30
»
"
»
»
"
»
»
»
"
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
377
378
379
380
382
384
388
395
406
423
262
261
257
253
251
251
258
267
279
292
31
32
33
34
35
36
37
38
39
40
»
»
»
»
»
»
»
»
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
446
475
510
551
595
641
689
739
791
844
307
322
339
359
380
403
430
459
491
525
41
42
43
44
45
46
47
48
49
50
»
»
"
»
»
»
»
»
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
898
953
1,009
1,070
1,140
1,220
1,300
1,380
1,460
1,540
564
605
648
693
741
792
849
914
987
1,065
51
52
»
»
. .
. .
1,620
1,710
1,150
1,238
Age
1895-1898
Table
of the
Prussian
Railways
Pension
Fund
1905-1912
Table
of the
Prussian
and
Hessian
Railways
Pension
Fund
53 y e a r s . .
54
»
55
»
56
>
57
58
59
60
'
1,800
1,890
1,990
2,100
2,210
2,320
2,440
2,580
1,323
1,408
1,493
1,578
1,663
1,756
1,860
1,979
61
62
63
64
65
66
67
68
69
70
2,730
2,900
3,100
3,310
3,560
3,860
4,160
4,560
5,110
5,810
2,120
2,289
2,489
2,717
2,968
3,242
3,539
3,870
4,248
4,725
6,750
7,800
8,900
10,000
11,100
•12,200
13,300
14,400
15,600
16,800
5,578
6,466
7,390
8,352
9,356
10,404
11,498
12,643
13,841
15,096
18,400
19,900
21,500
22,900
24,400
25,800
27,300
28,900
16,414
17,797
19,252
20,784
22,399
24,105
25,909
27,819'
29,847
32,002
Î
71
72
73
74
75
76
77
78 .
79
80
81
82
83
84
85
86
87
88
89
90
Ï
»
j
!
»
»
)
5
'
7
1
S
'
)
>
Í
»
»
>
'
'
y
>
i
,
>
'
»
. .
—
GERMANY
297
PROBABILITY OF BECOMING INVALID
The probabilities of becoming invalid which were used in the earliest
calculations
came from Behm's table relating to workers in various
industries 1.
The first experience of the scheme, up to 1894, showed appreciable
differences from the rates in this table and accordingly these were
adjusted by means of factors deduced from the comparison of various
data relating to the age distribution of invalids [13: pp. 3584-3585]. A
new table was constructed [16: pp. 13-24] which was based on the
industrial census as at 14 June 1895 and on the invalidity pensions
which began to be paid in the years 1895, 1896 and 1897. The number
of cases of invalidity occurring at the mean ages was taken to be the
greatest of the figures relating to each of the three years in question.
The probabilities of becoming invalid at each age were obtained by a
process of graphic interpolation.
Subsequently [18: pp. 538, 539 and 544] recourse was had:
(1) to the 1895-1898 invalidity table of the Prussian railways pension
fund-;
(2) for calculations relating to benefits granted to widows, to a table
constructed from the experience of the scheme itself in respect
of the pensions granted from 1900 to 1905 and from the insured
population between these two dates. The latter was estimated
on the basis of the 1895 industrial census projected, in each age
group, in accordance with the growth observed since the preceding
industrial census (1882).
The four invalidity tables mentioned above are collated in table X
(p. 298).
In a subsequent memorandum [19: pp. 21-28] the following were
adopted:
(1) for males, the rates from the Prussian and Hessian railways
pension fund, constructed from the experience during the quinquennium 1908-1912 of 1,518,594 insured persons who had completed their waiting period and 12,716 cases of invalidity;
(2) for females, a table constructed by comparing the experience of
the scheme itself in the period 1906-1908 with the table adopted
for males (see table XI) and with the table previously used for
widows' benefits (see table X, column 5).
The tables adopted for males and females are reproduced in table X I .
1
A description of the characteristics of this table and in particular of the
statistical material on which it was based does not seem to have ever been
published. A note attached to a technical memorandum [6: p. 96] indicates
merely that the crude figures were graduated on the assumption that the
probability of becoming invalid doubled itself every 5 years from age 20,
that is to say, by applying the formula ix = ¿20 2 B in which i20 was given an
approximate value obtained by the method of least squares 0.00019036.
298
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE X. —
Age
16 years. .
17
) g
18
> .
19
> .
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49'
50
51
52
53
54
55
56
57
ï
ï
>
> .
» t
» .
> .
1
t
» .
> .
)
» t
» .
»
s
.
Ï
I
>
> g
» .
)
,
) #
» .
»
>
^
»
»
»
' •
,
»
»
» .
» .
» m'
»
.
RATES OF BECOMING INVALID
Table deduced
from the
experience of
Behm's Table the workers'
insurance
scheme from
1895 to 1897
1895-1898
Table of the
Prussian
Railways
Pension
c Fund
Table deduced
from the
experience of
the workers'
insurance
scheme from
1900 to 1905
(females)
—
—
—
0.00011
0.00012
0.00014
0.00017
0.00019
0.0001
0.0002
0.0003
0.0004
0.0005
0.00002
0.00004
0.00007
0.00010
0.00016
0.00013
0.00022
0.00025
0.00029
0.00033
0.00038
0.00044
0.00050
0.00058
0.00066
0.00076
0.0007
0.0009
0.0011
0.0012
0.0013
0.0014
0.0016
0.0017
0.0018
0.0019
. 0.00023
0.00031
0.00039
0.00048
0.00059
0.00070
0.00081
0.00093
0.00106
0.00120
0.00034
0.00067
0.00108
0.00154
. 0.00216
0.00278
0.00332
0.00378
0.00418
0.00453
0.00087
0.00100
0.00116
0.00133
0.00152
0.00175
0.00201
0.00231
0.00265
0.00305
0.0021
0.0022
0.0023
0.0024
0.0026
0.0028
0.0030
0.0032
0.0035
0.0038
0.00134
0.00148
0.00163
0.00181
0.00203
0.00226
0.00252
0.00280
0.00310
0.00341
0.00484
0.00513
0.00539
0.00566
0.00593
0.00622
0.00654
0.00691
0.00732
0.00780
0.00350
0.00402
0.00462
0.00530
0.00609
0.00700
0.00804
0.00923
0.01061
0.01218
0.0041
0.0045
0.0050
0.0056
0.0062
0.0069
0.0076
0.0083
0.0091
0.0101
0.00374
0.00410
0.00449
0.00495
0.00545
0.00600
0.00665
0.00740
• 0.00830
0.00940
0.00836
0.00901
0.00975
0.01061
0.01159
0.01270
0.01396
0.01538
0.01697
0.01874
0.01399
0.01608
0.01847
0.02121
0.02437
0.02799
0.03215
0.0113
0.0126
0.0141
0.0157
0.0175
0.0195
0.0218
0.01060
0.01190
0.01340
0.01520
0.01730
0.01960
0.02210
0.02069
0.02286
0.02523
0.02784
0.03067
0.03376
0.03711
299
GERMANY
TABLE X.
RATES OF BECOMING INVALID
Table deduced
from the
experience of
Behm's Table tbe workers'
insurance
scheme from
1895 to 1897
Age
58 years. . . .
(continued)
1895-1898
Table of the
Prussian
Railways
Pension
Fund
Table deduced
from the
experience of
the workers'
insurance
scheme from
1900 to 1905
(females)
59
60
»
»,
0.03693
0.04242
0.04873
0.0243
0.0270
0.0305
0.02500
0.02860
0.03260
0.04074
0.04465
0.04885
61
62
63
64
65
66
67
68
69
70
»
»
»
»
»
»
»
»
»
»
0.05598
0.06430
0.07387
0.08485
0.09747
0.11196
0.12861
0.14773
0.16970
0.19493
0.0345
0.0385
. 0.0425
0.0470
0.0530
0.0610
0.0690
0.0770
0.0850
0.0950
0.03700
0.04180
0.04690
0.05300
0.05970
0.06700
0.07500
0.08400
0.09700
0.11200
0.05337
0.05820
0.06336
0.06886
0.07472
0.08096
0.08756
0.09455
0.10194
0.10974
71
72
73
74
75
76
77
78
79
80
»
»
»
»
»
»
»
"
»
»
0.22392
0.25721
0.29546
0.33939
0.38986
0.44783
0.51442
0.59092
0.67878
0.77972
0.1050
0.1150
0.1250
0.1400
0.1550
0.1750
0.1950
0.2150
0.2400
0.2680
0.13100
0.15300
0.17700
0.19400
0.20700
0.21900
0.22800
0.23700
0.24400
0.25000
0.11796
0.12662
0.13572
0.14528
0.15531
0.16578
0.17678
0.18828
0.20030
0.21284
81
82
83
84
85
86
87
88
89
90
»
»
»
»
»
»
»
»
»
»
0.89569
—
—
—
—
—
0.3050
0.3500
0.3970
0.4470
0.5000
0.5600
0.6200
0.6800
0.7400
0.8000
0.25600
0.26200
0.26800
0.27300
0.27800
0.28300
0.28700
0.29000
91
92
»
»
—
0.8600
0.9200
-
—
—
—
• — •
.
—
—
—
—
——
.—.
—
—
—
—•
—
—
300
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE XI. —
RATES OF BECOMING INVALID
(Probabilities in 0.00001)
Males
(Prussian
Females
and
(workers'
Hessian
Railways insurance
scheme
Pension
1906-1908)
Fund
1908-1912)
Age
20 years. .
21
22
23
24
25
26
27
28
29
»
»
"
»
»
»
»
»
»
30
"
.
.
.
.
Age
85
96
107
119
131
143
155
168
181
194
80
112
148
191
248
320
390
438
476
497
515
60
61
62
63
64
65
66
KOf\
CT
543
556
573
•595
622
654
691
732
32
33
34
35
36
37
38
39
"
»
»
»
»
»
»
»
207
22 r t
233
246
259
272
285
298
314
333
40
41
42
43
44
45
46
47
48
49
»
»
»
»
»
»
»
»
»
»
358
386
428
484
554
640
742
860
994
1,144
780
836
901
975
1,061
1,159
1,270
1,396
1,538
1,697
50
»
51 »
52 • »
53 »
54
»
55 »
1,310
1,492
1,690
1,904
2,134
2,437
1,874
2,069
2,286
2,523
2,784
3,390
ox
*JU\J
Males
(Prussian
Females
and
(workers'
Hessian
Railways insurance
scheme
Pension
1906-1908)
Fund
1908-1912)
56 y e a r s . .
57
» .
58
» .
59 » .
»
»
»
"
»
»
»
2,799
3,215
3,693
4,242
3,997
4,603
5,210
5,817
4,873
5,598
6,430
7,387
8,485
9,747
11,196
6,424
7,580
8,910
10,403
12,104
14,016
16,479
AO
OCA
A O CiA O
68
69
»
»
14,773
16,970
21,319
23,698
70
71
72
73
74
75
76
77
78
79
»
»
»
»
»
»
»
»
»
»
19,493
22,392
25,721
29,546
33,846
37,412
39,609
41,782
43,931
46,057
26,049
28,373
30,671
32,944
35,190
37,412
39,609
41,782
43,931
46,057
80
81
82
83
. 84
85
86
87
88
89
»
»
»
»
»
»
»
»
»
»
48,160
50,240
52,297
54,333
56,347
58,340
60,312
62,264
64,195
66,106
48,160
50,240
52,297
54,333
56,347
58,340
60,312
62,264
64,195
66,106
67,998
67,998
' 9 0
»
. .
10,310
GERMANY
301
SICKNESS
The loss of contributions due to sickness was estimated [6: p. 86] from
the mean annual numbers Kx of days of sickness at each age. These
means were taken from a table constructed by Heym 1 using statistics
collected by an insurance company dealing with persons belonging to a
wide range of industries.
Subsequently [8: p. 300] in the calculation of the income of the
scheme account was taken of the assimilation of sickness periods to
contribution periods by reducing by one the mean number of weeks of
contribution.
PROBABILITIES RELATING TO MARITAL STATUS AND TO SURVIVAL
OF DEPENDANTS
Insured Males
At each age the proportion of men married and widowed in the total
male population for insured trades, taken from the industrial census at
5 June 1882, was used to represent the probability wx that an insured
person would, on decease, leave one or more claimants (widow,,or orphan
less than 15 years old) [8: pp. 296, 297 and 13: pp. 3593].
The probability that an insured person on decease would leave a
widow was then considered [18: p. 542] and it was deemed to be the
same as the proportion Z,x of married men in the total male population
in insured trades. This proportion was first deduced at each age from
the industrial census of 1895. Later [18: p. 542] effect was given to.
the proportions indicated by the 1907 industrial census (which were on
the average 10 per cent, less than the former) and later still [19: pp. 36-37]
to the corresponding proportions in the general census of 1910 (table XII).
Insured Females
The probability w'y that an insured woman who died after becoming
a widow would leave one or more orphans less than 15 vears old was
first deduced [8: p. 297] from data given in the industrial census of
5 June 1882. This probability was deemed to be the same as the proportion of widows in thè total female population in insured trades.
It was thus assumed, for simplicity, that every widow on decease would
leave one or more children less than 15 years old. Experience showed
that this assumption produced figures which were too high, particularly
at the older ages. Consequently [13: pp. 3593-3594 and 16: pp. 34-35]
it was decided to retain the figures previously obtained up to age 45
and to substitute after that age:
up to age 50 a constant figure constituting the maximum rate;
from age 50 a series rapidly decreasing to very small figures at
age 60 and disappearing at age 70.
1
Anzahl und Dauer der Krankheiten in gemischter Bevölkerung Fünfundzwanzig Jahre Erfahrungen der Versicherungsgesellschaft " Gegenseitigkeit "
zu Leipzig.
Leipzig, 1884.
302
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE XII.
SURVIVORSHIP FACTORS FOR WIDOWS AND
DEPENDANTS
(Insured men)
Age
Probability v)x
that an insured
man
willdeath
leave
at his
one or more
dependants
m
Probability Ç that an
insured man will leave
a widow at his death
From the
1895
industrial
census
From the
1910
general
census
0.0000
0.0000
0.0005
0.0045
_
—
—
—
—
—
—
0.034
0.060
0.100
0.148
0.204
0.273
0.340
0.406
0.466
0.520
0.003
0.014
0.040
0.097
0.182
0.283
0.387
0.482
0.562
0.631
17
18
19
»
»
»
20
21
22
23
24
25
26
27
28
29
»
»
»
»
»
»
»
»
»
0.0145
0.0285
0.0690
0.1225
0.1964
0.2704
0.3444
0.4182
0.4921
0.5660
30
31
32
33
34
35
36
37
38
39
»
»
»
»
»
»
»
»
»
»
0.6395
0.7076
0.7514
0.7806
0.8064
• 0.8260
0.8438
0.8551
0.8658
0.8758
0.572
0.620
0.660
0.696
0.732
0.765
0.792
0.810
0.822
0.832
0.684
0.731
0.767
0.791
0.812
0.827
0.841
0.854
0.862
0.866
40
41
42
43
44
45
46
47
48
49
»
»
»
0.8815
0.8860
0.8885
0.8905
0.8920
0.8930
0.8940
0.8950
0.8960
0.8970
0.834
0.838
0.840
0.840
0.840
0.840
0.840
0.838
0.836
0.834
0.870
0.874
0.878
0.881
0.882
0.883
0.883
0.883
0.882
0.880
50
51
52
53
54
55
56
57
58
59
»
»
0.8978
0.8986
0.8993
0.9000
0.9007
0.9014
0.9021
0.9028
0.9035
0.9042
0.832
0.830
0.826
0.824
0.818
0.811
0.806
0.794
0.786
0.776
0.876
0.872
0.868
0.864
0.859
0.853
0.847
0.841
0.834
0.824
» . . . . ' . . .
. . . . . . . .
»
»
»
»
»
»
" . . . . . . .
»
»
»
. . . . . . . .
»
»
. . . . . . . .
. .
307
GERMANY
Healthy wives
(of insured
men)
themselves
insured
Healthy wives
(of insured
men) not
themselves
insured and
not liable
to enter
insurance
Healthy wives
(of insured
men)
jaa
Fv
2-
I
c
Healthy wives
(of insured
men) not
themselves
insured
jaa
F
-2
F
All wives of
insured
men
Healthy wives
(of insured
men) not
themselves
insured
but liable
to enter
insurance
F„ (1 -
a) - F°y
Pensioned
invalid wives
(of insured
men)
Invalid wives
(of insured
men)
lH
F
v
-Ü-
L
Not pensioned
invalid
wives (of
insured men)
F,
/:;
taaV
The results obtained at individual ages for these various categories
of wives (of insured men) are reproduced in table X I V .
308
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE XIV.
DISTRIBUTION OF WIVES OF INSURED MEN
BY AGE AND CATEGORY
Numbers of wives of insured men
Healthy lives
Age
Not themselves insured
Total
Total
20 years
Invalids
Themselves
insured
Total
Not
Likely to likely
enter into to enter
insurance into insurance
Not
pensioned
Total
Pensioned
22,500
22,500
9,000
13,500
7,717
5,783
0
0
0
21
22
23
24
25
26
27
28
29
30
»
»
»
»
»
»
»
"
"
"
54,000
85,000
109,100
125,000
135,000
142,500
148,200
152,500
154,500
155,000
53,995
84,974
109,013
124,837
134,703
142,015
147,459
151,432
153,079
153,202
13,400
16,100
18,100
19,400
20,400
21,200
22,000
22,500
23,000
23,500
40,595
68,874
90,913
105,437
114,303
120,815
125,459
128,932
130,079
129,702
27,100
48,160
65,034
76,725
84,360
90,377
94,930
98,890
100,754
101,585
13,495
20,714
25,879
28,712
29,943
30,438
30,529
30,042
29,325
28^117
5
26
87
163
297
485
741
1,068
1.421
1,798
4
21
73
138
252
413
630
909
1,208
1,522
1
5
14
25
45
72
111
159
213
276
31
32
33
34
35
36
37
38
39
40
»
»
»
»
»
»
»
"
»
"
154,000
152,500
148,000
144,000
138,100
132,300
125,000
118,000
112,000
106,000
151,798
149,892
145,025
140,645
134,413
128,305
120,750
113,504
107,262
101,029
24,000
24,500
25,000
25,400
25,600
25,800
25,900
26,000
25,700
25,100
127,798
125,392
120,025
115,245
108,813
102,505
94,850
87,504
81,562
75,929
101,048
99,940
96,360
92,968
88,056
83,083
76,850
70,760
65,804
61,184
26,750
25,452
23,665
22,277
20,757
19,422
18,000
16,744
15,758
14,745
2,202
2,608
2,975
3,355
3,687
3,995
4,250
4,496
4,738
4,971
1,854
2,182
2,462
2,749
2,985
3,192
3,338
3,466
3,603
3,736
348
426
513
606
702
803
912
1,030
1,135
1,235
41
42
43
44
45
46
47
48
49
50
»
»
"
"
»
»
»
»
»
"
101,500
96,300
92,000
87,000
83,000
79,000
75,500
71,500
67,500
63,300
96,242
90,801
86,222
80,997
76,700
72,411
68,577
64,286
59,994
55,546
24,000
22,900
21,800
20,800
19,900
19,100
18,500
17,900
17,200
16,700
72,242
67,901
64,422
60,197
56,800
53,311
50,077
46,386
42,794
38,846
58,316
54,814
52,076
48,626
45,919
43,073
40,239
36,869
33,492
29,825
13,926
13,087
12,346
11,571
10,881
10,238
9,838
9,517
9,302
9,021
5,258
5,499
5,778
6,003
6,300
6,589
6,923
7,214
7,506
7,754
3,947
4,112
4,317
4,461
4,665
4,851
5,055
5,206
5,354
5,422
1,311
1,387
1,461
1,542
1,635
1,738
1,868
2,008
2,152
2,332
51
52
53
54
55
56
57
58
59
60
»
»
»
»
»
»
»
»
»
»
59,500
57,000
54,700
52,700
49,400
46,500
43,000
39,500
36,500
32,600
51,462
48,513
45,729
43,182
39,579
36,335
32,671
29,084
25,944
22,276
16,200
15,600
15,000
14,300
13,600
12,900
12,200
11,300
10,400
9,500
35,262
32,913
30,729
28,882
25,979
23,435
20,471
17,784
15,544
12,776
26,521
24,300
22,196
20,429
17,818
15,697
13,299
11,254
9,638
7,648
8,741
8,613
8,533
8,453
8,161
7,738
7,172
6,530
5,906
5,128
8,038
8,487
8,971
9,518
9,821
10,165
10,329
10,416
10,556
10,324
5,508
5,758
6,029
6,366
6,447
6,556
6,472
6,369
6,324
5,921
2,530
2,729
2,942
3,152
3,374
3,609
3,857
4,047
4,232
4,403
309
GERMANY
TABLE XIV.
DISTRIBUTION OF WIVES OF INSURED
BY AGE AND CATEGORY
(continued)
MEN
Numbers of wives of insured men
Invalids
Healthy lives
Not themselves insured
Age
Total
Total
61 years
62 »
63 »
64 »
65 »
66 »
67 »
68 »
69 »
70 »
Not
pensioned
Pensioned
8,500
7,400
6,400
5,500
4,700
4,100
3,000
2,000
1,600
1,400
11,566
10,386
9,185
8,034
6,885
5,658
4,405
3,126
1,922
1,203
6,911
6,299
5,684
5,059
4,435
3,608
2,865
2,082
1,240
725
4,655
4,087
3,501
2,975
2,450
2,050
1,540
1,044
682
478
10,634
10,814
10,915
10,966
10,915
10,742
9,595
7,874
6,478
5,797
6,129
6,314
6,432
6,509
6,549
6,445
5,757
4,724
3,887
3,478
4,505
4,500
4,483
4,457
4,366
4,297
3,838
3,150
2,591
2,319
1,875
1,311
906
576
321
166
55
1,100
700
600
300
100
80
50
775
611
306
276
221
86
5
447
408
184
216
201
71
3
328
203
122
60
20
15
2
5,125
4,489
3,994
3,424
2,779
2,234
1,845
1,500
1,200
1,000
3,075
2,693
2,396
2,054
1,667
1,340
1,107
900
720
600
2,050
1,796
1,598
1,370
1,112
894
738
600
480
400
800
600
400
300
200
150
100
50
30
10
480
360
240
180
120
90
60
30
18
6
320
240
160
120
80
60
40
20
12
4
7,000
5,800
4,900
4,000
3,100
2,400
1,900
1,500
1,200
1,000
81
82
83
84
»
»
»
»
800
600
400
300
200
150
100
50
30
10
»
»
»
»
»
Total
20,066
17,786
15,585
13,534
11,585
9,758
7,405
5,126
3,522
2,603
»
»
»
»
»
»
»
»
»
»
86
87
88
89
90
Total
Not
Likely to likely
enter into to enter
insurance into insurance
30,700
28,600
26,500
24,500
22,500
20,500
17,000
13,000
10,000
8,400
71
72
73
74
75
76
77
78
79
80
OK
Themselves
insured
—
—
—
—
—
—
—
—
.—
—
—
—
—
—
—
—
—
—
—
—
4,138,340 8,308,563 838,930 2,969,633 2,284,172 685,461 329,777 218,237 111,540
DISTRIBUTION OF WIDOWS OF INSURED MEN IN CATEGORIES
In a later memorandum [19: pp. 36-52] recourse was had to three
series of probabilities—reproduced in table XV—relating to widows of
insured men.
The following probabilities were calculated for each of the age groups
shown in the industrial census of 14 June 1907, from the data of that
census, and then probabilities for individual ages were obtained by
interpolation:
310
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
(1) on the assumption that the number of wives of insured men
who are themselves insured is the same as the number of insured
married women, the probability £iy that the widow of an insured
man is herself insured;
(2) with the help of the proportion of wives of insured men who
are not occupied, the probability Qy that the widow of an insured
man will never enter into insurance;
(3) with the help of the proportion of occupied widows and divorced
women who.are insured, the probability QlyP that the invalid widow
of an insured man will be in receipt of a pension.
X V . — P R O B A B I L I T I E S FOR S U B D I V I D I N G
OF I N S U B E D MEN I N CATEGORIES
TABLE
that the widow
of an insured
man is herself
insured
(for a total
of 10,000)
Probability n" s
that the widow
of an insured
man will never
enter into
insurance
(for a total
of 10,000)
Probability iljf
that the invalid
widow of an
Insured man
will be
pensioned
(for a total
of 1,000)
2,293
2,273
2,254
2,224
2,193
2,105
2,015
1,906
1,787
1,688
3,770
3,756
3,664
3,294
2,992
2,750
2,564
2,418
2,289
2,172
730
650
611
596
585
577
569
561
553
545
Probability a"
y
Age
20 years
21
»
22
»
23 »>
24
»
25
"
26
»
27
»
28
"
29
»
. . .
WIDOWS
30
31
32
33
34
35
36
37
38
39
"
»
».
»
».
».
».
«
»
«
1,668
1,688
1,717
1,767
1,807
1,837
1,857
1,876
1,886
1,896
2,063
1,970
1,880
1,793
1,709
1,629
1,555
1,535
1,545
1,608
537
529
521
513
505
497
489
481
474
468
40
41
42
43
.44
45
46
47
48
49
»
»
».
».
».
>»
»
»
.»
»
1,906
1,896
1,886
1,876
1,866
1,857
1,847
1,827
1,807
1,768
1,697
1,900
2,104
2,309
2,515
2,723
2,930
3,135
3,337
3,535
462
456
450
444
438
432
426
420
414
408
•
311
GERMANY
TABLE XV.
PROBABILITIES FOB SUBDIVIDING W I D O W S
OF INSURED MEN IN CATEGORIES
(continued)
Age
50 years . . .
Probability CJ„
y
that the widow
of an insured
man is herself
insured
(for a total
of 10,000)
Probability n"*
that the widow
of an insured
man will never
enter into
insurance
(for a total
of 10,000)
Probability Q ^
that the invalid
widow of an
insured man
will be
pensioned
(for a total
of 1,000)
51
52
53
54
55
56
57
58
59
»
»
»
»
»
»
"
»
»
1,728
1,688
1,648
1,608
1,569
1,529
1,479
1,430
1,370
1,310
3,728
3,916
4,098
4,274
4,445
4,610
4,770
4,934
5,104
5,283
402
396
390
384
377
369
361
353
345
337
60
61
62
63
64
65
66
67
68
69
»
»
»
»
.»
»
»
»
»
»
1,251
1,191
1,132
1,072
1,013
933
834
715
596
476
5,475
5,685
5,920
6,188
6,498
6,861
7,214
7,566
7,917
8,267
328
319
309
298
286
273
259
244
228
211
70
71
72
73
74
75
76
77
78
79
»
»
»
»
»
»
»
»
397
338
298
278
259
207
122
68
34
18
8,616
8,964
9,278
9,533
9,721
9,848
9,930
9,976
193
174
154
133
111
89
67
45
23
»
O QOC
. / , •JtfXJ
•
10,000
With the help of these probabilities and of some of the biometrie
data mentioned above, a table was constructed showing at each age
the distribution of 10,000 widows of insured men, at the date of
husband's death, according to whether they are healthy or invalid
and insured or uninsured.
The number of invalid widows who have not been insured and who
consequently cannot be entitled to an invalidity pension 1 is
w ; n p = 10,000 lf (i -
Q;P) .
1
The numbers lü and lv, together with Z"a, formed the validity table for
females which had been constructed directly from the mortality rates of healthy
persons and probabilities of becoming invalid. See above, pp. 292 and 297,
and tables IX and X.
312
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
The number of healthy widows who will not enter into insurance is
obtained by deducting from the number 10,000 Q.y of widows not
r
liable to enter insurance the number 10,000 -~ of invalid widows,
that is
(cr;-lj\.
w 7 = 10,000
The number of widows who are themselves insured is represented
by Wy = 10,000 Q.y, and the number of invalid widows who had been
insured and who consequently may be entitled to an invalidity pension
is given by
w? = io;ooo lf o; p .
DIFFERENCE IN AGE OF HUSBAND AND W I F E
The average age of wife in relation to the age of husband [18: p. 543}
was based on a double-entry table which represented the distribution,
TABLE XVI.
DIFFERENCE IN AGE OF HUSBAND AND WIFE
Age of
husband
Age or
wife
20 years
21 years
21
22
23
24
25
»
"
»
»
»
22
23
24
25
26
»
"
"
»
»
26
27
28
29
30
»
»
»
»
»
26
26
27
28
28
»
»
»
"
»
31
32
33
34
35
»
»
»
»
»
29
30
31
32
32
»
»
»
»
»
36
37
38
39
40
»
»
«
»
»
33
34
35
36
3?
»
»
»
»•
»
/
Age of
husband
Age of
wife
Age of
husband
Age of
wife
41 years
42
»
43
»
44
»
45
»
38 years
39
»
40
»
41
»
42
»
61 years
62 »
63 »
64 »
65 »
55 years
56 »
57 »
58
"
59 »
46
47
48
49
50
»
»
'»
»
»
43
43
44
45
46
»
»
>»
»
»
66
67
68
69
70
60'
60 »
61 »
61 »
62 »
51
52
53
54
55
»
»
»
»
»
47
48
49
50
50
»
»
»
»
»
71 »
72 »
73' »
74 »
75 »
62
63
64
65
66
»
»
»
»
»
56
57
58
59
60
»
»
»
»
»
51
52
53
54
54
»
76
77
78
79
80
»
»
»
»
»
67
68
68
69
69
»
»
»
»
»
81
82
83
»
»
»
70
70
71
»
»
»
»
»
»
»
»
»
»
»
313
GERMANY
according to both age of wife and age of husband, of the female population of Thuringia 1 at the 1880 census.
These results—reproduced in table XVI—were compared with
others, from a different source, but it was decided [19: p. 51] that the
substitution of other figures was not necessary.
DATA RELATING TO
CHILDREN
Mortality
In order to estimate the mortality of children of insured men recourse
was had to the following:
(1) a life table lz—reproduced below—in respect of the total German
population between 1871 and 1881, for children of both sexes
[18: p. 546];
TABLE X V I I .
LIFE TABLE FOR CHILDREN
(Both sexes combined)
Age
German
life table
1871-1881
0
200,000
1 year
152,987
143,156
138,449
135,292
132,997
3
4
5
6
7
8
9
10
»
»
»
»
"
»
»
»
11
12
13
14
15
»
»
»
»
131,277
129,941
128,884
128,030
127,326
126,726
lÌé'Ì96
125,710
125,244
124,770
(2) a table deduced from the results of the general census 2 for the
years 1891-1900, which included monthly rates for the first year
of life and quarterly rates for the second year [19: p. 52].
Age Distribution of Children, according to Age of Father
Reference was made to the following [18: p. 546, and 19: pp. 51, 52]:
(1) a double-entry table giving kx the number of children at each
age from 0 to 14, according to age of father; this table, which
1
2
See p. 305.
Statistik des Deutschen Reichs, Band 200.
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315
GERMANY
is based on statistics compiled by the Ministry for Internal
Affairs in respect of IVL,. fathers belonging to the staff of the
Prussian railways, is reproduced opposite (table XVIII).
(2) the results of an enquiry l made by organisations of private
employees on the economic position of their members during
the month of October 1903 [19: p. 52].
Probability r\x that an Insured Man aged x is the
Father of a Child aged less than 15
These probabilities were derived from the experience of the staff of
a section of the Prussian railways (Berg-Markische Eisenbahn) ; they
are reproduced in table XIX.
TABLE
Probabilities r¡x
that an insured
man is the
father of a
child under
15 years of age
Age of insured man
19 y e a r s . . .
20
»
. . .
0.0010
0.0057
21
22
23
24
25
"
»
»
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.0125
0.0225
• 0.0375
0.0575
0.1244
26
27
28
29
30
»
»
"
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.2450
0.3740
0.4915
0.5990
0.6850
31
32
33
34
35
»
»
»
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.7560
0.7930
0.8183
0.8370
0.8505
36
37
38
39
40
»
»
»
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.8602
0.8650
0.8680
0.8710
0.8715
41
42
43
44
45
»
»
»
»
»
.
.
.
.
. .
.
.
.
.
.
.
.
.
.
0.8705
0.8640
0.8537
0.8415
0.8315
|
1
1
1
XIX
Age of insured man
Probabilities nx
that an insured
man is the
father of a
child under
15 y ears of age
46 y e a r s . . .
47
»
. . .
48
"
. . .
49
"
. . .
50
»
. . .
0.8225
0.8145
0.8055
0.7910
0.7710
51
52
53
54
55
»
»
»
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.7450
0.7130
0.6705
0.6210
0.5600
56
57
58
59
60
»
»
»
»
"
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.4950
0.4333
0.3850
0.3400
0.3050
61
62
63
64
65
»
»
"
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.2880
0.2710
0.2540
0.2349
0.2215
66
67
-68
69
70
»
»
»
»
»
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.2120
0.2010
0.1880
0.1730
0.1530
71
72
73
»
»
"
. . .
. . .
. . .
0.1225
0.0710
0.0050
|
See Reichstag, 12. Legislaturperiode, I. Session, 1907, No. 226.
316
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
§2. — Insured Population
Under the 1889 Act the following were compulsorily insured as
from age 18:
(1) workmen, assistants, journeymen, apprentices or domestic
servants, who receive a salary or emolument;
(2) salaried employees whose annual salary does not exceed 2,000 RM.
The 1899 Act extended the field of compulsory insurance to include
foremen, technical employees, teachers and tutors, whose salary does
not exceed 2,000 RM.
In addition both these Acts provided that the liability to insure
could be applied to small tradesmen by a decision of the Federal Council.
Under the Act of 1911 compulsory social insurance covered, as from
1 January 1912, all workers belonging to one or other of the following
classes:
(1) workmen, assistants, journeymen, apprentices, domestic servants;
(2) works officials, foremen and other salaried employees in a similar
position, provided that in each case this employment is their
principal occupation;
(3) commercial clerks and apprentices, assistants and apprentices
in pharmacies;
(4) members of the theatrical profession and musicians ;
(5) teachers and tutors;
(6) crews of seagoing vessels and of vessels engaged in inland
navigation,
who fulfil the following conditions:
(a) they must have attained age 16;
(b) they must be in receipt of a remuneration other than free
maintenance;
(c) if they belong to one of the classes enumerated under (2) to (5)
inclusive, their regular annual salary must not exceed 2,000 RM.
It was also provided that the Federal Council could extend the
liability to insurance to the following persons either throughout the
Federation or only in particular districts:
(1) persons carrying on industry and other owners of businesses
who employ regularly not more than one insured workman;
(2) persons engaged in home industry whatever the number of
workers they employ.
317
GERMANY
ESTIMATE OF THE INITIAL INSURED POPULATION
In order to estimate the initial insured population, reference was
made to the industrial census of 5 June 1882. Taking into account
the various classes of workers covered by the insurance scheme, figures
were obtained for their total, and for its distribution in quinquennial
or decennial age groups. The distribution at individual ages was
thence deduced directly by graphic interpolation. Account was taken
of the growth of the insured population between 1882 and 1889 on
the basis of the known increase in the total population between 1880
and 1885. Two further adjustments were made to allow for, on the
one hand, insured relatives of an agricultural employer living with
him and working for him in return for remuneration and, on the other
hand, salaried employees who are not insurable by reason of the variety
of their employments [6: pp. 81-83].
The figure finally arrived at for the insured population in the middle
of 1889 was 11,018,000, including 7,322,000 men and 3,696,000 women.
SUBSEQUENT ESTIMATES OF THE INSURED POPULATION
The industrial census of 14 June 1895 brought out a total of 11,813,000
workers engaged in insurable employment, distributed in the following
manner:
Males
Females
Age group
Total
(in thousands)
18-20
20-30
30-40
40-50
. . . .
750
754
2,417
1,618
1,035
67»
345
110
542
561
1,488
547
405
326
179
58
1,292
1,315
3,905
2,165
1,440
1,004
524
168
. . .
7,707
4,106
11,813
»
»
"
»
60-70
»
.
70 years and over
Total
331,271 were added to the males to take into account workers
completing their military service, and the estimate was projected to
the beginning of the year 1900 by means of an annual coefficient of
increase 1 / fixed at 1.013942, on the basis of the increase shown by
a comparison of the two industrial censuses of 1882 and 1895 [16:
pp. 11-13].
1
The annual coefficient oí increase of a population is simply the ratio of
the population at the end of the year to that at the beginning of the year,
on the assumption that this ratio remains constant.
318
ACTUARIAL T E C H N I Q U E A N D F I N A N C I A L
ORGANISATION
The same procedure and the same coefficient of increase were adopted
until the results of the 1907 industrial census became known. This
census—by the inclusion of a question for that purpose—enabled a
direct enumeration to be made of the male and female insured populations. In each age group the figure for the insured population was
divided by that for the total population to produce an " insurance
ratio ". The results are reproduced below (table XX).
TABLE X X . —
TOTAL A N D I N S U R E D
POPULATIONS
(From the industrial census of 12 June 1907)
Females
Males
Age group
Total
population
(1)
(2)
16-18 years .
18-20 »
20-25 »
25-30 »
30-40 "
40-50 »
50-60 »
60-70 »
70 and over .
Unknown . .
1,191,927
1,162,590
2,654,736
2,467,146
4,220,293
3,177,104
2,167,715
1,386,701
719,451
3,120
Total . .
19,150,783
Proportion
Total
Insured
insured
population ( 4 ) = | y X 1,000 population
Proportion
Insured
insured
population (7)4^X1,000
(5)
(6)
(7)
(4)
(5)
1,600,482
2,382,126
1,524,351
865,159
358,479
44,018
659.7
716.2
589.7
648.7
564.4
479.8
399.1
258.5
61.2
673,869
644,638
1,135,418
564,567
652,419
475,429
306,970
137,349
17,166
563.0
549.5
429.7
230.9
154.8
145.7
126.0
82.1
18.8
—
—
1,196,941
1,173,156
2 6 " 9i¿
2,445,124
4,213,857
3,263,413
2,437,183
1,672,056
913,176
1,884
—
—
9,959,145
—
19,959,134
4,607,825
—
(3)
786,405
832,620
In order to obtain the insured population as at 1 January 1914, the
following procedure was adopted [19: pp. 11-14]. Recourse was had
to the distribution of the total population, as at 1 January 1911,
according to year of birth and year of age, drawn up by the Imperial
Statistical Office 1. This distribution was projected to 1 January 1914,
by applying to each group an appropriate survivorship factor in
accordance with the German mortality table 1901-1910 a. Applying
to the figures obtained in this way the insurance ratios in table XX
above, the insured population as at 1 January 1914 was obtained and
its distribution according to year of birth. This produced a total of
11,420,600 men and 4,980,600 women, distributed as follows:
1
2
Statistik des Deutschen Reichs, Band 240 (2), p. 254.
This method was justified by a check calculation which reproduced with •
sufficient accuracy the figures of the 1907 census from those of the 1911 census.
319
GERMANY
TABLE X X I .
INSURED
POPULATION
(As at January 1914)
Males
Males
Females
Year of birth
(in thousands)
(in thousands)
1897
1896
1895
1894
1893
1892
1891
1890
1889
1888
1887
1886
1885
1884
1883
1882
1881
1880
1879
1878
1877
1876
1875
1874
1873
1872
1871
1870
1869
1868
1867
1866
. . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Females
Year of birth
446.2
468.8
461.0
465.3
458.3
438.2
430.0
412.7
390.5
382.8
367.1
348.5
338.8
320.6
295.3
291.5
272.4
271.1
263.8
258.7
252.5
246.0
235.6
222.5
211.2
206.0
165.7
184.6
175.4
162.1
153.0
151.0
376.9
374.5
352.9
339.3
311.1
271.9
240.8
204.6
172.4
149.3
128.8
113.8
101.5
90.2
80.1
76.8
72.0
72.8
72.8
71.9
70.8
70.4
67.8
64.3
61.0
61.0
48.7
56.1
54.5
51.4
49.4
51.2
1865
1864
1863
1862
1861
1860
1859
1858
1857
1856
1855
1854
1853
1852
1851
1850
1849
1848
1847
1846
1845
1844
1843
1842
1841
1840
1839
1838
1837
1836
1835
1834
. . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
136.9
132.9
125.0
115.6
107.4
109.8
104.8
96.8
89.9
81.5
74.3
74.1
68.1
61.1
53.0
48.4
39.8
30.9
24.1
20.1
17.5
13.7
10.8
9.7
7.2
6.4
4.5
3.5
2.4
\.l
1.0
0.5
47.4
47 5
44"8
41'5
37'6
39'2
37-0
33-5
301
27'3
23-7
24-2
21-4
20-6
17-9
18-5
15-8
14-0
11-2
10-4
9-7
8-1
6-4
5'6
3-2
2-1
0-6
0-2
0-1
—
—
~
The same method also enabled an estimate to be made of the insured
population at the end of the year 1914 and its age distribution.
ESTIMATES OF THE NUMBER OF ENTRANTS INTO INSURANCE
EACH YEAR
In the preparatory investigations it was assumed [7: p. 101] that
all entries would take place at the three youngest ages, 16, 17 and 18,
and, moreover, that their number (^dtx and fdly) at each age and for
320
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
each sex would remain constant from year to year and could be deduced
from the age distribution (JTLX and êFy) of the initial population by
means of the formulae
For females
For males
m
9lw
= JRw'
<yC16 =
3¡»
•¡da
m
J T I I T - DXl
JiL
M
£^7 =
n
snw
=
JHl8-
—
jaa
¿16
jaa
>£>l 17
^
#17
et
¿17
- # 1 6 »aa
¿16
¿18
JYL —
l t
=
t/C18
=
#18
" jaa
¿17
# n jaa
I'll
In a subsequent calculation [16: p. 43-44] it was assumed that all
entries would take place at ages 16, 17 or 18 and that the numbers
m
9Lx and f9ly could still be calculated by means of the above formulae
but that the basic age distribution would be that shown for each sex
by the 1895 industrial census. The following results were thus obtained
for male and female entrants:
^ ^
=
370,500
m
=
10,800
=
6,600
9Hu
m
dlla
1
¡ftu
=
265,400
f
9l»
=
12,300
JLjg =
5,400
Instead of supposing, as hitherto, that these numbers would remain
constant, it was assumed that they would increase in conformity with
the annual coefficient of increase of the active population, whose value
/ = 1.013942 was obtained from a comparison of the industrial censuses
of 1882 and 1895 \ Consequently, in order to estimate the number
of entrants in the year 1900, the numerical values of mdZx and ffTLv
obtained from the industrial census were multiplied by the factor fiJ>.
In order to obtain a closer estimate the following procedure was
adopted in a later memorandum [19: pp. 14-18]. The number of
entrants at age 16 was deduced, for males and females separately,
Age at entry
17
18
19
30-39
»
»
»
Males
.
»
1,000
250
100
55
200
100
75
Females
.1,000
225
90
50
210
110
90
1
In a previous investigation [13: p. 3617] the annual coefficient of increase
was taken to be 1.00935, which corresponded to the increase in the total
population between 1816 and 1900.
321
GERMANY
from t h e insured populations at the beginning and end of the year 1914.
Applying to these numbers the proportions given in t h e table on page 320,
which were obtained from statistical data based on contribution cards,
the numbers of entrants at ages greater t h a n 16 were obtained.
When the number of entrants at each age bad been calculated in
this manner for t h e year 1914, table X X I I was constructed [ 1 9 :
p p . 18-19] by reference t o figures obtained in t h e manner indicated
above 1 for the insured population at the beginning and end of t h e
year. This table gives a complete picture of t h e movement of insured
persons during the year in question; in particular t h e total n u m b e r of
exits from insurance and their age distribution are shown.
TABLE X X I I . — MOVEMENT OF THE INSURED POPULATION DURING 1 9 1 4
(Estimates in thousands)
Males
Year of birth
1898
1897
1896
1895
1894-1885 . . .
1884-1875 . . .
1874 and earlier.
Total
. . .
Females
Population
at
beginning
of 1914
at end
of 1914
446.2
468.8
461.0
4,032.2
2,707.5
3,304.9
456.9
468.2
482.4
465.3
3,960.6
2,633.0
3,148.2
11,420.6
11,614.6
Population
Entrants
Exits
at
at end
beginning of
1914
of 1914
Entrants
Exits
1.1
458.0
92.0
114.0
46.0 t 32.4
20.7
25.0
92.0 163.6
46.0 120.5
34.0 190.7
376.9
374.5
352.9
2,033.5
745.6
1,097.2
387.0 .388.0
87.0
371.9
35.0
367.8
19.0
340.6
81.0
1,815.5
727.3
43.0
1,051.7
35.0
1.0
92.0
41.7
31.3
299.0
61.3
80.5
815.0
4,980.6
5,061.8
688.0
606.8
621.0
The number of entrants in later years was deduced from t h e figures
obtained for 1914 b y means of t b e annual coefficient of increase / , for
which t h e v a l u e o f 1.02 was adopted for males and 1.014 for females.
ESTIMATE OF THE A N N U A L N U M B E R OF E X I T S FROM
INSURANCE
The t o t a l number of exits from the field of insurance during 1914,
shown in table X X I I , when compared with t h e exits due t o d e a t h a n d
invalidity, produced [19: p p . 19-20] figures which related t o exits from
1
See p. 320.
21
322
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
insurance due to other miscellaneous causes. The latter are shown
below:
Exits from insurance top cause»
other than death or invalidity
Age
18
19
30-39
»
>»
»
Total
Males
Females
90,600
30,900
19,000
146,400
101,700
, 55,800
91,000
40,600
30,100
188,900
53,400
18,000
444,400
422,000
For later years the numbers of exits were deduced from the figures
relating to 1914 by means of the annual coefficient of increase / already
used for entrants, that is, 1.02 for males and 1.014 for females.
EXPERIENCE
The annual returns of the Federal Insurance Office produced the
following figures:
Year
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
Insured
population
in thousands
11,490
11,650
11,813
11,978
12,145
12,314
12,486
12,660
12,836
13,015
13,197
13,381
Year
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
Insured
population
in thousands
13,600
13,756
13,948
14,143
14,958
15,226
15,444
15,660
15,878
16,099
16,324
§ 3. — Number of Beneficiaries
From the statistical returns published each year are extracted the
numbers of pensions due to invalidity l , temporary invalidity (sickness}
and old age, which were current on 1 January in each year.
1
The conditions of award and the method of calculation, in respect of the
various classes of benefit, are described in Chapter II, pp. 331-337.
323
GERMANY
TABLE X X U I .
TOTAL NUMBER OF PENSION
BENEFICIARIES:
EXPERIENCE
Pensions
In force
in year
Invalidity
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
11,999
37,815
71,755
110,377
161,670
210,859
264,899
324,319
405,337
486,945
574,833
663,140
734,985
780,762
814,575
841,992
868,086
893,585
918,760
940,875
965,624
998,339
I
Sickness
—
—
—
—
— '
—
—
—
5,118
8,700
12,146
14,186
16,977
20,141
22,099
20,081
19087
18,502
16,965
15,768
15,905
16,555
Old Age
Total
118,997
150,403
166,976
183,168
195,723
203,955
203,644
201,329
195,133
188,472
179,450
168,550
156,618
145,466
134,080
125,603
116,887
108,637
102,362
98,335
93,369
90,071
87,261
118,997
162,402
204,791
254,923
306,100
365,625
414,503
466,228
519,452
598,927
675,095
755,529
833,944
897,428
934,983
962,277
978,960
995,810
1,014,449
1,034,060
1,050,012
1,071,600
1,102,155
TABLE XXIV. — NUMBER OF LUMP SUM PAYMENTS MADE AS REPAYMENTS
OF CONTRIBUTIONS
Year
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
. . .
;
On death
On marriage
2,271
16,766
22,537
25,811
30,367
34,142
32,342
32,028
32,603
32,526
33,951
32,829
35,464
36,779
37,560
34,936
38,297
5,411
8,245
63,444
99,805
121,977
135,097
156,122
158,184
153,282
154,468
154,368
151,856
153,226
152,478
151,347
148,441
147,292
154,901
18,094
On grant of
pension under
workmen's
compensation
insurance
—
—
—
234
355
575
778
855
767
710
616
586
549
494
446
279
324
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
Further, at the end of 1913, 12,066 widows' or widowers' pensions
and 94,435 orphans' pensions were in course of payment.
The repayment of contributions 1 in the event of death or marriage
and, as from 1900, to holders of a workmen's compensation pension,
was made in one lump sum: the number of such payments in respect
of each year is given in table XXIV (p. 323).
Repayments of contributions were abolished as from 1 January
1912, when the benefit of insurance was extended to survivors; however,
a certain number of them were made, with retrospective effect, after
that date.
TABLE OF SYMBOLS INTRODUCED IN CHAPTER I
/
= Life table (healthy lives and invalids together).
jaa
jìi
l
x lx
= Number of healthy lives and invalids respectively from the
validity table.
GX
= Aggregate or ultimate probabilities of cessation of invalidity.
O'w+ft
=
i
= Rates of becoming invalid.
~aa
"*
= Probabilities of death of a healthy life without previously having
become invalid.
I1
= Life table for invalids.
Select probabilities of cessation of invalidity.
\x
(jl
= Mortality rates of invalids.
¡KJJ
= Average annual number of days of sickness.
L.
r*
= Probabilities t h a t an insured man will on decease leave one or
m o r e claimants t o benefit;
= Probabilities t h a t an insured woman who dies after becoming
a-widow will leave one or more orphans aged less than 15.
W,y
= Probabilities t h a t an insured.man will on decease leave a widow.
Y
= Probabilities t h a t an insured woman is single.
¡i
= Probabilities of marriage in respect of females.
Fy
= N u m b e r of wives of insured men.
•po
v
= N u m b e r of healthy wives (of insured men) who are themselves
insured.
GERMANY
325
A
= Proportion of widows of workers in insured trades who are themselves employed.
Q
= Probabilities that the widow of an insured man is herself insured.
ryis
'v
= Probabilities that the widow of an insured man will never enter
into insurance.
Qtp
v
= Probabilities that the widow of an insured man who is invalid
will be in receipt of a pension.
W?" P
= Number of invalid widows (of insured men) who are not pensioned.
Y^tms
v
= Number of healthy widows (of insured men) who will not enter
into insurance.
W
= Number of widows (of insured men) who are themselves insured.
W,p
= Number of invalid widows (of insured men) who are pensioned.
lz
= Life table for children.
f}Z
= Number of children aged z according to the age x of father.
= Number of fathers corresponding to the kx children.
Y)
'*
= Probabilities that an insured man aged x is the father of a child
aged less than 15.
/
= Annual coefficient of increase.
jfî
*
= Initial male insured population or the male insured population
at a given date.
es
"
= Initial female insured population or the female insured population
at a given date.
m
— Annual number of male entrants into insurance.
^dX-a
= Annual number of female entrants into insurance.
fTi
CHAPTER II
FINANCIAL ESTIMATES, BASES AND EXPERIENCE
§ 1. — Contributions
WAGE CLASSES AND RATES OF CONTRIBUTION
Insured persons are divided iiito classes according to their wages and
for each class a rate of contribution is fixed which is apportioned equally
between the insured person and his employer.
The 1889 Act instituted four wage classes which were defined, together
with the corresponding rates of contribution, as follows 1M.
Wage class
I
II
Ill
IV
Annual wages
in marks
up
350
550
more
t o 350
t o 550
t o 850
t h a n 850
Weekly rate
of total
contribution
in marks
0.14
0.20
0.24
0.30
Without altering the first three classes, the 1899 Act limited class IV
to wages between 850 and 1150 marks and created a new class V for
wages in excess of 1150 marks, to which was assigned a weekly rate
of 0.36 marks K
On 1 January 1912, when the benefit of insurance was extended to
survivors, the wage classes remained unaltered but the rates of contribution were increased to the following figures:
Wage class
I
II
Ill
IV
V
Annual wages
in marks
up t o
350 t o
550 t o
850 t o
more t h a n
350
550
850
1,150
1,150
Weekly rate
of total
contribution
in marks
0.16
0.24
0.32
0.40
0.48
These rates of contribution were fixed by the Act for a period of ten years.
327
GERMANY
CALCULATION OF THE PRESENT VALUE OF CONTRIBUTIONS
1
The present value of a unit contribution payable as long as the
insured person is a healthy life is
\
= —•„ where D* = L• v , N . = > , D* and V
„aa
"x
-x ~ < -x
¿¿¿"x
x
1+ Í
As the contributions are payable weekly, the present value was
taken as
aa(52)
aa
3.x
— ax Q.x
a2
where a^ = 1 and a, =0.5154, these being approximate values for a
rate of interest of 3.5 per cent.
The normal annual number of weekly contributions was taken as 47,
.-since the pensions were to be reduced if the annual number of weekly
»contributions was less than this figure. Account was taken of the loss
of contributions during periods of sickness [7: p. 100] by reference to
a sickness table which gave for each age the average number K^ of
days of sickness per annum per insured person 2 . The number of
weekly contributions not paid on account of sickness was taken as
K
equal to —- and the corresponding present value was calculated by the
iormula
* 2 D ;" K .
?
D:°
Finally, the present value of the expected contributions for an insured
erson aged x was calculated, on the basis of a unit weekly payment,
y the formula
E
n
.„
aa(«2)
Cx = 47 ax
0*2°*
x
—— 5
7 Dx
Subsequently [8: p. 300] the adjusting factor for periods of sickness
was abolished and the number of weeks of contribution was diminished
by one.
If payment of contributions ceases in all cases at a fixed age, say
for example 70, temporary expressions are used
a.'x,70-x|
rC - iC
oa
1
More modern symbols have been substituted for those used in the original
memoranda.
2
See Chapter I, p. 301.
328
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
and
„atusa)
„aa«2)
aa<62)
3-Jc, 70-x\
As an illustration are reproduced from a later memorandum [19:
p. 64], the numerical results obtained at a rate of interest of 3.5 per
cent, for the present value of future contributions in respect of an
insured person of a given age, when (a) payments are made weekly,
(b) the annual amount of the contribution is a unit and (c) the payments
are continued until the insured person becomes invalid or dies.
P R E S E N T V A L U E a ° a < 6 2 ) O F A U N I T CONTRIBUTION P A Y A B L E
TABLE X X V .
x
W E E K L Y AT 3 . 5 P E R CENT. I N T E R E S T
Age of insured
person at date
of calculation
of present valu«
Maies
Females
16 y 2 years
17 y 2
»
18 %
"
19%
"
21.150
20.927
20.703
20.475
20.350
20.090
19.828
19.562
20 y 2
2i y 2
22 y 2
23 y 2
24 y 2
25 y 2
26 y 2
27 y 2
28 y 2
29 y 2
»
»
»
»
»
»
»
»
»
»
20.244
20.007
19.764
19.513
19.254
18.987
18.711
18.428
18.137
17.840
19.293
19.021
18.745
18.466
18.183
17.901
17.621
17.340
17.056
16.767
30 y 2
3i y 2
32 y 2
33 y 2
34 y 2
35 y 2
36 %
37 y 2
38 y 2
»
»
»
»
»
»
»
"
»
39 y 2
»
17.535
17.222
16.902
16.574
16.238
15.893
15.540
15.178
14.807
14.428
16.472
16.168
15.856
15.535
15.206
14.867
14.521
14.167
13.806
13.437
40 y 2
41 y 2
42%
43 y 2
44 y 2
45 y 2
46 y 2
47 y 2
48 y 2
• 49%
»
»
..
»
»
»
»
»
».
»
14.040
13.644
13.240
12.831
12.416
11.998
11.577
11.154
10.731
' 10.307
13.062
12.680
12.293
11.901
11.503
11.100
10.694
10.283
9.870
9.454
.
Age of insured
person at date
of calculation
of present value
50% years .
Males
Females
9.036
8.616
8.194
7.769
7.339
6.915
6.506
6.108
5.716
5.326
51 %
52%
53%
54%
55%
56%
57 %
58%
59%
"
»
»
»
»
»
»
»
.
.
.
9.885
9.464
9.044
8.624
8.203
7.783
7.365
6.950
6.539
6.134
60%
61 %
62%
63%
64%
65 %
66%
67 %
68 %
69%
»
»
»
»
»
»
»
»
»
»
.
.
.
.
.
.
.
.
.
.
5.735
5.344
4.963
4.592
4.234
3.889
3.558
3.241
2.937
2.648
4.933
4.545
4.176
3.826
3.497
3.190
2.912
2.665
2.445
2.245
70%
71 %
72%
73%
74%
75 %
76%
77%
78%
79%
»
»
»
»
»
»
»
»
»
»
.
.
.
.
.
.
.
.
.
.
2.374
2.119
1.890
1.690
1.526
1.402
1.303
1.213
1.128
1.045
2.061
1.894
1.745
1.611
1.490
1.381
1.279
1.181
1.076
0.975
80%
"
0.957
0.805
.
.
.
.
329
GERMANY
EXPERIENCE
Detailed figures are published annually in respect of thecontributions
received by the territorial insurance institutions.
Below are reproduced:
(1) the total annual number of weekly contributions;
(2) the distribution of 1,000 contributions between the different
wage classes;
(3) the average amount of the weekly contribution.
TABLE XXVI. —
427,183
424,418
428,584
441,859
453,202
479,512
490,680
507,630
544,232
523,154
541,613
551,220
575,338
596,464
619,054
639,875
655,980
b65,932
674,195
698,382
733,816
730,848
752,118
l-t
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Distribution it 1,000 contributions
into classes
Number of
weekly
contributions
in thousands
Year
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
W E E K L Y CONTRIBUTIONS RECEIVED EACH Y E A R
BY REGIONAL INSTITUTIONS
.
253
235
229
230
227
221
214
206
199
189
179
157
146
138
133
127
119
114
105
91
84
77
78
II
III
IV
384
404
397
394
392
385
379
370
361
342
336
329
324
313
305
290
274
263
250
241
227
207
209
217
223
232
233
235
241
243
244
244
238
239
254
259
255
250
244
242
243
254
259
262
256
257
146
138
142
143
146
153
164
180
196
158
162
169
174
175
178
183
183
179
178
177
174
176
164
V
—
—
—
—
• — •
—
—
—
73
84
91
97
119
134
156
182
201
213
232
253
284
292
Average
amount of
a weekly
contribution
in marks
0.2081
0.2086
0.2097
0.2099
0.2104
0.2117
0.2133
0.2155
0.2174
0.2255
0.2280
0.2318
0.2340
0.2379
0.2406
0.2446
0.2492
0.2520
0.2549
0.2586
0.2623
0.3498
0.3491
The annual contribution income appears in the last column of
table XXXVIII (p. 389).
§ 2. — State Aid
Financial aid from the State included, from the date of inauguration
of the scheme until 1 January 1912, the individual supplement (Reichszuschuss) of 50 marks, which was added to each invalidity and old-age
pension, and also the repayment to the insurance institutions of the
increments in respect of periods of military service, based on the scale
:330
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
of the second wage class. On 1 January 1912 the individual supplement
was extended to widows' and widowers' pensions and, to the amount
of 25 marks, to orphans' pensions; at the same time a grant-in-aid
was introduced for the purpose of increasing the amount of each widow's
allowance by 50 marks and each orphan's allowance by 16.66 marks;
•on the other hand, the repayment of the increments in respect of
periods of military service was abolished on that date.
•CALCULATION OF THE PRESENT VALUES OF INDIVIDUAL SUPPLEMENTS
AND GRANTS
Since the individual supplements and grants were fixed in amount
for each class of pension, the present value may be deduced directly
from the present value of the fixed portion of the corresponding benefit.
The method of calculation of the latter is described in § 3 below 1 .
EXPERIENCE
The total amount of the yearly financial grants from the State is
¡shown in thousands of marks in table XXVII.
TABLE XXVII. — STATE GRANTS—EXPERIENCE
(in thousands of marks)
Individual
supplements
Year
1891
1892
1893
1894
1695
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
'
1
,. . . .
. . . . .
. .
. . . .
. . . . . . . . . .
See pp. 337 et seq.
.
6,050
9,041
11,337
13,922
16,930
19,225
21,824
24,380
27,080
30,714
33,803
37,756
41,732
45,126
47,174
48,553
49,392
50,266
51,214
52,219
52,933
55,069
58,526
Eepayment of
increments
in respect
of periods
of military
service
1
3
7
13
21
28
48
68
93
122
150
177
204
228
256
287
319
350
Total
6,050
9,041
11,337
13,923
16,933
19,232
21,837
24,401
27,108
30,762
33,871
37,849
41,854
45,276
47,351
48,757
49,620
50,522
51,501
52,538
53,283
55,069
58,526
GERMANY
331
In this table the second column includes, up to 1911, only the
individual supplements added to invalidity and old-age pensions,
while from 1912 onwards it includes also the individual supplements
added to widows' and orphans' pensions and the individual grants
added to widows' and orphans' allowances.
§ 3. — Benefits
The 1889 Act from the outset provided for invalidity and old-age
pensions and for repayments of contributions to survivors of deceased
insured men and to insured women on marriage. . These classes of
benefit continued to be granted until 1 January 1912, but the 1899
Act introduced appreciable amendments to the conditions of award,
the method of calculation and, consequently, the amount of the payments. The 1911 Act introduced pensions and allowances to widows
and orphans and at the same time abolished the repayments of contributions; the invalidity and old-age pensions were also subjected to
various amendments. In addition, the insurance institutions were
empowered from the commencement of the scheme to grant to insured
persons or invalids medical benefit (called " optional " benefit) for the
purpose of the prevention or cure of invalidity.
A brief description will be given of the conditions of award—especially
the provisions relating to waiting period and maintenance of benefit
rights—and the rules for the calculation of benefits which have been
successively applied. The various classes of benefit will be considered
in turn. In the preceding paragraph it was seen that all classes of
pension and also widows' and orphans' allowances included a portion
whose cost is borne by the State and the amount was mentioned at
which this portion was successively fixed. Hence it is only necessary
here to consider the amount of the benefits which are borne by the
insurance institutions.
CONDITIONS OF AWARD AND AMOUNT OF BENEFIT
Invalidity
Pensions
In the Event of Permanent Invalidity
Since the coming into force of the scheme the invalidity pension has,
in principle, been awarded to all insured persons who become permanently incapable of remunerative work (excluding incapacity covered
by workmen's compensation insurance). Under the 1889 Act an
insured person was deemed to be an invalid when by reason of his
bodily or mental condition he was no longer able to earn a wage at
least equivalent to the sum of
(1) one-sixth of the average annual wage on the basis of which
contributions had been paid on his behalf during the last five
years and
(2) one-sixth of 300 times the average daily wage of workmen in
the locality where he last worked otherwise than in a purely
, temporary capacity.
332
A C T U A R I A L T E C H N I Q U E AND FINANCIAL
ORGANISATION
The 1899 Act simplified the definition of invalidity. As from
1 January 1900, an insured person was deemed to be an invalid when
his earning capacity was permanently reduced by one-third, that is to
say when he was no longer capable of earning, in any employment
suited to his strength and ability which could reasonably be assigned
to him in view of his training and former employment, one-third of
the wage usually earned in the same district by a physically and mentally
sound worker of the same kind with similar training. This definition
was essentially retained by the 1911 Act.
In the Event of Temporary Invalidity
The 1889 Act provided in addition that an insured person who was
not permanently incapable of remunerative work, but who had been
disabled continuously for a year, should receive an invalidity pension
for the further duration of his incapacity. As from 1 January 1900,
under the 1899 Act the continuous period of disablement entitling to
pension was reduced to 26 weeks. Temporary invalidity pensions
were continued under the 1911 Act under the heading of " sickness
pensions " (Krankenrenten).
Waiting Period
The award of an invalidity pension has always been subject to the
completion of a waiting period. In the beginning this comprised
five years each containing 47 weekly contributions. As from 1 January
190O it was sufficient for 200 weekly contributions to have been paid,
provided that not less than 100 contributions had been paid under
the provisions of the compulsory insurance scheme x.
From the inauguration of the scheme until 1 January 1912 the
periods reckoned towards completion of the waiting period included,
in addition to weeks covered by contributions, weeks of sickness up
to a maximum of one year and weeks of military service. As from
1 January 1912 only contributions actually paid were taken into account.
A transitional provision of the 1889 Act allowed periods of salaried
employment, military service and sickness before the date of coming
into force of the Act to be taken into account for the completion of
the waiting period, if they were not separated from the occurrence of
the event insured against by more than five years and provided that
one year's compulsory contributions had been paid. The 1899 and
1911 Acts introduced analogous transitional arrangements applicable
to the classes of insured persons to which they extended the liability
to insurance.
Maintenance of Benefit Rights
In the early years of the scheme's operation the right to benefit
was suspended when 47 weekly contributions had not been paid either
compulsorily or voluntarily during four successive years, taking into
account the weeks of sickness, up to a maximum of one year, and the
weeks of military service which were deemed to be equivalent to weeks
actually covered by the payment of contributions. The right to
benefit was restored after a new waiting period of five years.
1
If this proviso was not complied with, the waiting period could not be
completed until a total of 500 contributions had been paid.
333
GERMANY
Under the 1899 Act the right to benefit was suspended when the
stamps appearing on an insurance card two years after the date ofissue did not represent at least 20 weekly contributions; the right to
benefit was restored after a new waiting period of 200 weekly contributions.
The 1911 Act introduced the following two modifications to the
provisions in force:
(1) an insured person aged not less than 40 nor more than 60 could
revive his right to benefit only if he had paid 500 weekly contributions before the'lapse of his right and in that case he was
subjected to a new waiting period of 500 weekly contributions;
(2) an insured person aged more than 60 could revive his right to
benefit only if he had paid 1,000 weekly contributions before
the lapse of his right and in that case he was subjected to a
new waiting period of 200 weekly contributions.
For the maintenance of benefit rights the following periods were
taken into account in addition to weeks covered by the payment of
contributions:
under the 1889 Act, weeks of sickness up to a maximum of one year
and periods of military service;
under the 1899 Act, which on this point was reproduced by the
1911 Act, periods of sickness and military service, as before,
and in addition periods during which benefit is received under
the workmen's compensation or other insurance schemes.
Amounts of the Pension borne by the Insurance Scheme
The invalidity pension charged to the insurance scheme has been
from the beginning composed of two portions, (1) a basic sum (Grundbetrag) and (2) increments (Steigerungsbetrag) which depended on the
number and amount of the contributions paid. As from 1 January
1912 it could include in addition a bonus (Kinderzuschuss) for each
child under 15 years of age. An indication will be given below of the
scales which have been successively applieu to eacu oi tuese portions
of pension.
The 1889 Act fixed the basic sum at 60 marks per annum for all
insured persons.
Under the 1899 Act the basic sum comprised:
0.12 marks for each contribution paid in wage class I
"•i^i
jj
,,
H
ii
ii
)»
ii
ii
*•
"•1Ö
U.lo
,,
,,
,,
,,
,,
,,
,,
. ,,
,,
,,
,,
,,
,,
,,
,,
,,
HA
A »
0.20
„
„
„
„
„
„
„
„
V
With the help of this scale the amount of the basic sum was obtained
by taking the sum of the amounts corresponding to the 500 contributions
paid in the highest wage classes; if the number of contributions was
less than 500, it was made up to this total on the assumption that
the missing contributions had been paid in wage class I.
The 1911 Act did no. more than reproduce the provisions relating
to the calculation of the basic sum.
334
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
The increments were calculated in accordance with the following
scales :
Annual Increment, in marks, corresponding
to a weekly contribution
Wage class
I
II
Ill
IV
V
Before
1 January 1900
On and after
1 January 1900
0.02
0.06
0.09
0.13
0.03
0.06
0.08
0.10
0.12
. .
Under the 1911 Act, if the recipient of an invalidity pension maintained one or more children under 15 years of age, he received for
each child a bonus equal to one-tenth of the amount of his pension,
including the State supplement.
SII J
A
7>
.*
An insured person aged 70 or more who was not an invalid received
an old-age pension. If he subsequently became an invalid the invalidity
pension was substituted for the old-age pension.
Waiting Period
The waiting period prescribed for entitlement to the old-age pension
was fixed by the 1889 Act at 30 contribution years, that is to say,
30 times 47, or 1,410 weekly contributions.
It was reduced by the 1899 Act to 1,200 weekly contributions.
The weeks reckoning towards the completion of the waiting period
were determined according to the same rules as for invalidity pensions.
As a transitional provision a reduction of the waiting period was
allowed under the following conditions. Under the 1899 Act the
waiting period was reduced by x — 40 years for every insured person
whose age x was greater than 40 at the date of coming into force of
the scheme, if he had completed during the three years preceding that
date at least 141 weeks of military service, sickness or employment in
àn occupation which was compulsorily insurable under the Act. As
from 1 January 1900, this transitional provision was modified as follows.
The waiting period was reduced by 40 (x — 40) \seeks of contribution
for every insured person whose age x was greater than 40 at the date
when the insurance scheme was applied to his occupational group, if
he proved that during the three years preceding that date he had been
employed at that trade—even if during that period his employment
had been interrupted by military service, sickness or by other circumstances specified in that Act. No such proof was required of an insured
person if 200 weekly contributions or more had been paid during the
first five years of the application of the scheme to his occupational
group.
335.
GERMANY
Maintenance of Benefit Rights
The statutory provisions relating to invalidity pensions have alwaysbeen applicable to old-age pensions.
Amount of the Pension borne by the Insurance Scheme
The old-age pension has since the origin of the scheme consisted of'
only one element, for the calculation of which the two following scales.were applied in turn:
Annual amount, in marks, corresponding
to one weekly contribution
Wage class
Before
1 January 1900
On and after
1 January 1900
0.04
0.06
0.08
0.10
0.05
0.075
0.10
0.125
0.15
I
II
Ill
IV
V
—
Before 1 January 1900 the amount of the old-age pension was"
assessed, on the basis of the first of the above scales-, by calculating;
the total sum corresponding to the number of weekly contributions.
required for the waiting period, that is, 1,410. In cases where periods
of prior service were reckoned as weeks of contribution, they were:
made to correspond, in calculating the amount of the old-age pension,
with the average wage earned during the 141 weeks of employment.
prescribed for the application of the reduction in the waiting period.
On and after 1 January 1900 the method of calculation was the same
but the scale was altered (see above) and the number of weekly contributions required'for the waiting period was reduced to 1,200. In*
cases where the number of weekly contributions actually paid' was less'il
riAA
//AA
_-
J
A
T
AnAt}\
I
^-J-
-*'
-
'
tumi ¿\)\j ¡ i w as íruin i January l a i z ; aim perluu» oi priur service
were reckoned as contribution weeks, these periods were taken into
account, in the calculation of the amount of pension, on the basis of
the average wage earned during the three years of employment prescribed for the application,of the reduction in the waiting period. In.
cases where the number of weekly contributions actually paid was at'
least 200 (400 as from 1 January 1912) and periods of. prior service;
were reckoned as contribution weeks, these were divided, between thewage classes, in the calculation of the amount of, pension^.proportionatelyr
to the number of contributions paid in each of these classesPayments io Survivors'
The 1911 Act instituted, as from- 1 January 1912, pensions and«
allowances for the benefit of widows, and onphans to.be-granted under
the same conditions as to waiting period and; maintenance of benefit!
rights as invalidity pensions. Payment», to survivors were defined int
the following manner.
336
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
Widows'1 (or Widowers') Pensions
A pension is granted to the widow of an insured man if she is
permanently disabled *; a widow who is temporarily disabled receives,
after 26 consecutive weeks of invalidity, a widow's pension for the
further duration of her invalidity. The payment of a widower's pension
is subject to two supplementary conditions: that the insured wife
defrayed the whole or the greater part of the cost of maintenance of
her family and that the widower is in need.
The amount of the widow's (or widower's) pension which is borne
by the insurance scheme is fixed at 3/10 of the amount of the invalidity
pension, borne by the insurance scheme, which the invalid received or
which the insured person would have received if instead of dying he
had become disabled.
Widow's Allowance (Witwengeld)
An allowance equal to 12 monthly payments of the widow's pension
is paid on the death of the husband, if the widow herself fulfils the
conditions regarding the waiting period and maintenance of benefit
rights required for the invalidity pension or if the widow is in receipt
of an invalidity pension because she had been herself insured.
Orphan's Pension
The orphan's pension is granted, on the death of an insured father,
to his legitimate children aged less than 15 and, on the death of an
insured mother, to her fatherless children aged less than 15.
The amount of the orphan's pension which is borne by the insurance
scheme is fixed, for the first orphan, at 3/20 and, for each further orphan,
at V40 of the amount of the invalidity pension, borne by the insurance
scheme, which the invalid received or which the insured person would
have received if instead of dying he had become disabled.
Orphan's Allowance (Waisenaussteuer)
An allowance equal to eight monthly payments of the orphan's
pension is paid to each orphan on attaining the age of 15, if the mother
herself fulfils the conditions regarding the waiting period and maintenance
of benefit rights required for the invalidity pension or if she is in receipt
of an invalidity pension because she had been herself insured.
Repayment of Contributions
Under the 1889 Act half of the contributions paid on behalf of the
insured person were repayable in the three following cases:
• (1) if an insured man dies before becoming entitled to a pension:
the repayment inures to the benefit of his widow and, in the
absence of a widow, of his legitimate children under 15 years
of age;
(2) if an insured woman dies before becoming entitled to a pension:
the repayment inures to the benefit of her legitimate children
under 15 years of age if they are already fatherless;
1
It cannot be received at the same time as an invalidity pension granted
to the widow by virtue of her own personal insurance; in cases where the
widow is entitled to both classes of pension at the same time she receives
the one which is the greater in amount.
337
GERMANY
(3) if an insured woman marries and ceases to be insured before
becoming entitled to a pension: she herself receives the benefit
of the repayment.
The 1899 Act extended the benefit of the repayment of contributions
to the following:
children whose father has never supported them;
a widower whose wife was the support of the family;
injured workmen rendered permanently incapable of work.
The 1899 Act stipulated that the repayments could not be made if
at least five years had not been covered by the actual payment of
contributions. The 1899 Act reduced to 200 the number of weekly
contributions which must have been paid.
The 1911 Act repealed all provisions relating to the repayment of
contributions.
CALCULATION OF PRESENT VALUES OF INVALIDITY PENSIONS
1
Unit Invalidity Pension in the Course of Payment
First Calculation [7: p. 96]
The present value of a unit invalidity pension in the course of payment was calculated by means of a continuous process using the formula
a* = 1 + v (1 — (7X) a*+1
commencing with aM which has been taken equal to unity (ox represents
the probability of cessation of invalidity) 2 .
For monthly payments the formula is
o
¿(12)
=
ex
i
(>
/>
—3C
"•X
"1*
and 0.463 was taken as an approximate value for S12.
Second Calculation [16: p. 30]
When the probabilities of cessation of invalidity were defined by a
select table 3—for durations of invalidity not greater than 11 years—
select annuity values a ^ . ^ were calculated instead of a x , commencing
with the identity
a
i
[x]+u
=
a
i
x+u
and applying a continuous.process using the formula
a
M+fc =
1 + î> (1
<*[x]+h) a[x]+ft+i •
1
More usual symbols have been substituted for those employed in the
original memoranda.
a3 See pp. 279-281.
See pp. 281-289.
22
338
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
As an illustration are reproduced from a later memorandum [19: p. 53]
the numerical results obtained, at 3.5 per cent, interest, for the present
value of an invalidity pension in the course of payment, according to
the age and sex of pensioner.
TABLE X X V I I I . — P R E S E N T VALUE OF AN I N V A L I D I T Y P E N S I O N IN COURSE
OF P A Y M E N T , PAYABLE MONTHLY, W I T H I N T E R E S T AT 3 . 5 P E R C E N T .
Age of pensioner
at date of
calculation of the
present value
20 years
21
»
22
»
23
»
24
»
25
»
26
»
27
»
28
»
29
»
.
For a unit amount
of pension
Males
Females
3.951
4.079
4.204
4.326
4.444
4.560
•4.678
4.795
4.912
5.029
6.434
6.830
7.234
7.619
8.007
8.400
8.786
9.133
9.430
9.711
Age of pensioner
at date of
calculation of the
present value
60 years
61
»
62
»
63
»
64
»
65
»
66
»
67
»
68
»
69
»
.
For a unit amount
of pension
Males
Females
7.086
7.021
6.942
6.854
6.751
6.639
6.515
6.381
6.238
6.087
9.605
9.401
9.188
8.961
8.724
8.479
8.229
7.968
7.706
7.438
30
31
32
33
34
35
36
37
38
39
»
»
»
»
»
»
"
»
»
»
5.144
5.253
5.362
5.472
5.581
5.688
5.796
5.899
6.002
6.103
9.969
10.199
10.401
10.587
10.752
10.902
11.028
11.119
11.194
11.262
70
71
72
73
74
75
76
77
78
79
»
»
»
»
»
»
»
»
»
»
5.923
5.756
5.587
5.408
5.229
5.048
4.863
4.677
4.488
4.295
7.163
6.885
6.609
6.333
6.057
5.785
5.513
5.248
4.990
4.741
40
41
42
43
44
45
46
47
48
49
»
»
»
»
»
"
»
»
»
»
6.196
6.285
6.374
6.462
6.548
6.631
6.709
6.785
6.853
6.918
11.303
11.335
11.343
11.339
11.323
11.297
11.256
11.204
11.148
11.079
80
81
82
83
84
85
86
87
88
89
»
»
»
»
»
»
»
»
»
»
4.105
3.916
3.731
3.550
3.375
3.205
3.041
2.884
2.734
2.589
4.501
4.267
4.042
3.827
3.622
3.428
3.244
3.068
2.901
2.741
50
51
52
53
54
55
56
57
58
59
»
»
6.974
7.026
7.075
7.119
7.154
7.178
7.194
7.189
7.163
7.133
11.002
10.914
10.816
10.704
10.578
10.444
10.291
10.135
9.970
9.794
90
91
92
93
94
95
96
97
98
99
»
»
»
»
»
»
»
»
»
2.452
2.320
2.194
2.074
1.956
1.839
1.717
1.578
1.395
1.103
2.589
2.445
2.307
2.175
2.046
1.918
1.784
1.631
1.431
1.119
100
»
0.629
0.629
»
»
»
»
»
»
»
»
.
. •
. .
»
.
339
GERMANY
Invalidity Pension in course of Acquisition
First Calculation [7: pp. 96-99]
The present value of a unit invalidity pension in the course of
acquisition was calculated approximately for an insured person aged x
in the following manner.
Take a group of lx healthy lives at the time tv at which the present
value of the invalidity pensions in course of acquisition is to be calculated.
In the year following t0 there will be lx ix cases of invalidity, giving
rise a year later, at the time t0 + 1, to a crop of
C ix (i - f
invalidity pensions. If each of these pensions is of unit amount, the
present value of this first crop of pensions calculated at the time t0 is
CK^-fj.v.^Z
In addition, account is taken of the pensions paid between t0 and t0 -+- 1
7 aa
•
1
/
on the assumption that ——- pensions are awarded in the middle of
each month, and proceeding as follows.
At the end of the first month, there are to be taken into account:
(1) the payments made during half of the month, whose present
value is expressed by
*
CK
12
' 24 '
and
(2) the monthly instalments of pension in the course of payment,
Cx i "x
12
\
24
whose present value is
V
12
7aa
l
.
* ** ( 1 _ ffx
12 12 Y
24
At thé end of the second month, there are similarly:
(1) the present value
3
naa •
lx *x
12
rr
^
' 24
of the payments made during half the month; and
340
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
(2) the monthly instalments of pension in the course of payment,
whose total number consists of (a) the survivors of the first
monthly crop of new pensions, viz.
C i* (, _ 3
12
\
CT.,
x
24
and (b) the survivors of a new crop of invalids arising in the
middle of the second month, viz.
iaa
'
/
¡•x lx
( i
12
\
CT,
24/ '
making a total of
12 • V
24
*
The present value of these monthly instalments of pension is consequently
ida
ia
•
l
/
,
î!_ *-h (2 - —
12 '
12
24 °x
\
Proceeding in the same manner for each month in succession a total
is obtained of
—
24
23
JL
'
12
i
/„
^
4
\
.
12
.
' 12 L
£ /..
V
24/
+
121
or, at the rate of interest of 3.5 per cent., approximately
Ç
ix (0.4893 — 0.1428 a x ) .
Finally, the present value of the pensions commencing during the
first year, from t0 to t0 + 1, is expressed by the formula
*
ai<i2>
D*
7 aa
= ix
• ,-,
x
ix ex v
where
ex = v ( i — ^ \
Si™! + 0.4893 -
0.1428 <JX .
341
GERMANY
Taking into account all subsequent years and adding the results
together there is obtained for a unit invalidity pension
*
a
* . . a i (12)
Nx
ai(i2)
*
* NT ai(i2)
where
= -T35-
N
*
a
-STI *
= ^
D
a 02)
ax
*
7\> exclude invalidity due to industrial accidents, the factor i* was
replaced by ix—ux; and on the assumption that ux = kix it was
only necessary to adjust the result calculated with ix by multiplying
by 1 — k. On the basis of invalidity statistics relating to railway
staff the factor 1 — k was taken as 0.87.
In the original Bill the invalidity pension was granted only after a
waiting period of one year and during the first four years it was calculated
at a reduced rate which increased year by year, without however
exceeding half the fixed portion of the normal pension. In order to
*
di(12
make allowance for these provisions there was substituted for a x
a new present value b^2.x
which was calculated, for the sake of
1
simplicity, by taking the amount of the pension to be — for the first
A
four years during which the reduced pension is payable and one unit
for the fifth year and onwards, thus:
, *.»-ai<i2)
*_at(i2)
-•-Li
nía
*-jai(i2)
* ~.ai (12)
\V
».|y.ai(i2>
^OC+ 6
2
i
»-..ai U2>
2D a a
X
A calculation was then made of the present value of the invalidity pension
provided for in the original Bill, that is to say, taking into account a
pension which as from the fifth year of invalidity was composed of:
(1) a fixed portion amounting to 24 per cent, of the annual wage *;
(2) increments dependent on the number of years of insurance
completed since the end of the waiting period, in the following manner:
4 per mille of the annual wage for each of the first 15 years of insurance
completed since the end of the waiting period;
6 per mille of the annual wage from the 16th to the 35th year of
insurance completed since the end of the waiting period;
8 per mille of the annual wage from the 36th to the 45th year of
insurance completed since the end of the waiting period.
For males the calculations were made on the assumption of an average
annual wage of 500 marks, that is to say, on the basis that the fixed
portion of the pension would be 120 marks, that the maximum pension
would be 250 marks and that the increments would be fixed at 2, 3
and 4 marks respectively. For females all these figures were reduced
in the proportion of % which, according to the Bill, was to be the ratio
between the amounts of the pensions to females and males.
1
Under the original Bill there would have been five wage classes with
annual basic wages rising by intervals of 100 marks, from 300 to 700 marks.
342
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
To sum up, the present value of the pension provided for in the
1888 Bill was expressed, in the case of an insured man aged x, by the
formula
! _ k (120
/
*. = ^ r
^X
^
.
2>
x+r
+ *Nf
*
"*
+
+1
+5
2
3C + 20
2 ^
•
'Nf 1 2 )
+
3C + 6
3C + 40
3C+50
at(i2>
+ 3 2 'NT + 4 2 *N
3C+21
x + 41
or
r ¿
öx+6
-+- Í3 X + 2 1 +
&x+il
, *0aiU2>I
putting
CO
*~ai02)
- ^
»»,01(12)
x
Second Calculation [13: pp. 3610, 3611 and 16: pp. 50-52]
The présent value of a unit invalidity pension in course of acquisition
is obtained, for an insured person aged x, and taking into account a
waiting period of 4 years, by the formula
„ai(12)
™x+i
oo
*-^x
ai(i2)
4|ax
where
-
v
x+i jaa •
''x *x
a
ina)
M
,
and
lvT at(i2)
Nœ
2D;
X
For an insured person aged x, the present value of the right to
increments of invalidity pension of which the amount increases by
unity for every year completed since the end of the waiting period is
obtained by the formula
P
„ai<i2>
&X + 5
a¿(12)
4 a
—
l s
~Z~ää
where
(Ú
„ai(i2)
_
^ ^
^«(12)
X
• Under the provisions of the Bill, to which the actuarial investigations
made from 1895 to 1899 related, the waiting period was reduced to
200 contribution weeks and the invalidity pension was composed of a
fixed portion g and of increments whose total increased by a constant
amount m for each contribution vear.
343
GERMANY
Invalidity pensions awarded during the fifth year of insurance must
then, on the average, have equalled g + 4.5 m;
invalidity pensions awarded during the sixth year of insurance must
on the average have equalled g + 5.5 m,
and so on.
As a result of this method of assessing the amount of the invalidity
pension, its present value, for an insured person aged x, could be
expressed thus
^,i<i2>,
,
at(i2)
<%x (g,m) = g .
MSLX
,
_
+ 4.5 m
ai(i2)
4[a.x
.
p
+ m 4 ,a a
oi(i2)
.
As an illustration are reproduced, from a later memorandum [19:
pp. 54, 551, the numerical results of a calculation of the present value,
at the rate of interest of 3 % per cent., of an invalidity pension in
course of acquisition, according to the age of the insured person, and
for men and women separately, on the two alternative assumptions,
(1) that the amount of the pension is constant and equal to unity and
(2) that the amount increases by unity for each contribution year.
TABLE XXIX. — PRESENT VALUE OF AN INVALIDITY PENSION IN COURSE
OF ACQUISITION, PAYABLE MONTHLY AFTER 4 YEARS WAITING P E R I O D ,
WITH INTEREST AT 3 . 5 PER CENT.
For a unit amount
of pension
Age of insured person
at date of calculation
of the present value
1 6 % years
17 %
»
18%
»
19%
»
20 %
»
¿L y2
"
. .
For an amount which
increases annually
for every year
of contribution
Males
Females
Males
Females
1.015
1.054
1.094
1.135
1.926
1.998
2.073 "
2.151
35.262
36.587
37.975
39.427
55.309
57.371
59.529
61.789
1.179
2.234
40.943
64.157
A
l . X ¿Z,
ci ctA n
Ü.D1U
/ A f\it e
•íl.X/LU
CC
f.Qt.
Uci.-±0**
C\C\C\
22 %
23 %
24%
25 %
26 %
27 %
28 %
29 %
»
»
»
»
»
«
»
»
1.265
1.309
1.354
1.401
1.448
1.497
1.547
1.599
2.397
2.478
2.559
2.638
2.715
2.790
2.864
2.938
42.275
42.609
42.914
43.189
43.432
43.643
43.821
43.966
65.645
65.757
65.823
65.856
65.860
65.834
65.769
65.654
30 %
31 %
32%
33 %
34%
35 %
36 %
37 %
38 %
39 %
»
»
»
»
»
»
»
»
»
»
1.652
1.707
1.764
1.822
1.883
1.946
2.010
2.078
2.148
2.220
3.012
3.090
3.166
3.246
3.328
3.411
3.497
3.584
3.674
3.765
44.075
44.146
44.175
44.161
44.100
43.989
43.825
43.604
43.324
42.981
65.482
65.244
64.943
64.566
64.113
63.585
62.977
62.292
61.525
60.678
344
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
TAHLE X X I X .
PRESENT VALUE OF AN INVALIDITY PENSION IN COURSE
OF ACQUISITION, PAYABLE MONTHLY AFTER 4 YEARS WAITING PERIOD,
WITH INTEREST AT 3 . 5 PER CENT
(continued).
Age of insured person
at date of calculation
of the present value
Males
40 % years
41%
»
42%
»
43%
»
44%
•»
45%
»
46%
>
47% . »
48%
»
49%
»
»
50%
si %
52%
»
53%
»
. .
ï
54%
55%
56%
57 %
58%
59%
60%
61%
62%
63%
64%
65%
66%
67%
68%
69%
S
»
»
Î
»
»
,
»
>
1
»
9
»
»
>
'
»»
70%
71%
72%
• 73%
74%
75%
76%
77%
78%
79%
»
80%
»
Sí
"
5»
)ï
»
ï»
î»
î)
. .
For an amount which
increases annually
for every year
of contribution
Por a unit amount
of pension
Females
Males
Females
2.295
2.373
2.454
, 2.537
2.622
2.708
2.796
2.884
2.973
3.063
3.858
3.952
4.048
4.146
4.244
4.344
4.443
4.544
4.644
4.744
42.573
42.097
41.552
40.940
40.261
39.516
38.708
37.838
36.909
35.924
59.747
58.734
57.637
56.455
55.190
53.839
52.406
50.888
49.291
47.615
3.153
3.243
3.334
3.424
3.514
3.602
3.688
3.768
3.844
3.913
4.845
4.946
5.048
5.151
5.254
5.350
5.432
5.501
5.559
5.610
34.884
33.789
32.639
31.428
30.152
28.814
27.424
25.990
24.517
23.013
45.860
44.030
42.104
40.091
37.976
35.818
33.679
31.544
29.396
27.212
3.975
4.029
4.075
4.112
4.140
4.158
4.166
' 4.161
4.144
4.111
5.658
5.696
5.715
5.715
5.696
5.657
5.593
5.497
5.372
5.222
21.488
19.953
18.418
16.897
15.399
13.933
12.506
11.125
9.797
8.529
' 24.961
22.697
20.503
18.395
16.383
14.481
12.730
11.163
9.756
8.488
. 4.061
4.000
3.932
3.852
3.753
3.628
3.486
3.343
3.203
3.073
5.047
4.857
4.663
4.468
4.271
4.073
3.882
3.693
3.505
3.353
7.331
6.227
5.236
4.367
3.648
3.094
2.659
2.277
1.946
1.654
7.345
6.330
5.445
4.673
4.001
3.417
2.906
2.454
2.048
1.693
2.970
3.267
1.389
1.310
.
345
GERMANY
Capital Values of the Invalidity Pensions awarded Each Year
[8: pp. 292-294]
On the assumption that the insured population remained " stationary ", that is to say, that it would remain unchanged in total and in
age distribution, the following method of procedure was adopted.
Let the number of insured males at age # at any given time be JHX,
and let Cx be the present value of the unit invalidity pensions commencing during a year in which the beneficiaries are aged from x to
x + 1, or, in other words, let Cx be the capital value of the invalidity
pensions awarded to insured males who become invalid between age x
and x + 1 during the year under consideration 1 . The capital value
of all the unit pensions awarded during a year to beneficiaries aged
at least e is expressed
JC S — ^
i
J\lx
lx <2X
The Bill that was under consideration provided for a waiting period
of five years and contained transitional provisions under which the
weeks during which the insured person had been employed in an
insurable occupation during the five years preceding his incapacity
could be taken into account for the purpose of completing four years
of waiting period. In order to give effect to these provisions the
following were taken as the present value of the crop of invalidity
pensions which would be awarded each year from the date of coming
into force of the scheme (for males):
0
X
"V
for the first year
Î)
)?
second year
15
H
third year
>!
I)
fourth year
îî
1Ï
fifth year
î)
Î!
sixth and subsequent years
1
"Kl
¿»V2i
Under the provisions of the same Bill the invalidity pension was to
consist of. a fixed portion equal to 12.5 per cent, of the annual wage
together with increments calculated on the following scale:
0.25 per cent, of the annual wage for each of the 20 years following
the completion of the waiting period;
0.5 per cent, of the annual wage for each of the completed years
between the 21st and the 45th following the completion of the
waiting period.
Consequently, the capital values of the invalidity pensions which
would be awarded in each year following the coming into force of the
1
For the calculation of <3X see above, p. 340.
346
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
scheme, were estimated for an average annual wage of 100 by the
following formulae (for males):
m
äcl = 0
m
3CÌ
= 12.5
m
jci 7
m
1
àC3
= 12.5
ití>i
= 12.5
m i
= 12.5
m i
m
m „A
mMA
n
XÎ = 12.5 m j 4 + 0.25 mJCL
"«L = 12.5 mjcl + 0.25 ( 2
\
ttso
m
22
42
12.5 m j d + 0.25 ^ .
\
m
< - 2
jcl)
/
m
JCÍ - ' S m /í€^ +
2a
42
+ 0.5
/
2m^-2m<
Analogous expressions d£n for females were obtained in the same
manner.
CALCULATION OF PRESENT VALUES OF OLD-AGE PENSIONS X
Unit Old-Age Pension [7: pp. 99-100]
Under the provisions of the 1888 Bill, the old-age pension was payable
to every insured person who attained age 70, and who had not previously become an invalid, for so long as he remained a healthy life;
if he became an invalid the invalidity pension was substituted for the
old-age pension. The amount of the old-age pension was to be fixed
at 24 per cent, of the annual wage.
The present value, at age x, of the right to a unit pension awarded
under these conditions is given by the formula
Naa
•to-xfi-x
—
aa
x
or, giving effect to the payment in monthly instalments
aa(i2)
70-x|äjc
ao
==
70-x¡^'X
^
^12
where 0.463 is an approximate value for 812.
1
More modern symbols have been substituted for those used in the original
memoranda.
347
GERMANY
The present value of a pension granted at the commencement of
the scheme to an insured person who had already attained or passed
the age of 70 is given, for a unit amount, by
=
0.463
a.
(x > 70).
The present value of an old-age pension of 120 marks per annum
(calculated on the basis of a mean annual wage of 500 marks) may
then be represented by í£ which is obtained by the formulae
aa(i2)
if
x < 70 and
if
X > 70
lx — 120 7o_x|a.
120 a!
As an illustration are reproduced from a later memorandum [19: p. 57]
the numerical results obtained, with interest at 3.5 per cent., according
to age and sex, for the present value of a unit old-age pension in course
of acquisition, on the assumptions that the pension age is fixed at
65 and at 70.
TABLE X X X . — P R E S E N T VALUE OF AN OLD-AGE P E N S I O N IN COURSE
OF ACQUISITION PAYABLE MONTHLY, W I T H I N T E R E S T AT 3 . 5 P E R C E N T .
Age of insured person
at date of calculation
of the present value
1 6 % years
1?%
"
18%
»
19%
"
. .
For a pension of unit
amount payable from
age 65
For a pension of unit
amount payable from
age 70
Males
Females
Males
Females
0.251
0.260
0.270
0.281
0.147
0.153
0.159
0.165
0.052
0.054
0.056
0.059
0.022
0.023
0.024
0.025
0.291
0.303
0.061
0.063
0.066
0.068
0.071
0.074
0.076
0.079
0.083
0.086
0.026
0.027
0.028
0.029
0.030
0.032
0.033
0.034
0.036
0.037
0.089
0.093
0.097
0.101
0.105
0.109
0.114
0.119
0.124
0.129
0.039
0.041
0.042
0.044
0.046
0.048
0.051
0.053
0.055
0.058
20%
»
9-1 l/_
„
22%
23%
24%
25%
26%
27%
28%
29%
»
»
»
»
»
«
"
»
0.327
0.339
0.353
0.366
0.381
0.396
0.412
0.171
0.178
0.185
0.192
0.200
0.208
0.216
0.225
0.235
0.245
30%
31%
32%
33%
34%
35%
36%
37%
38%
39%
»
"
»
»
"
»
»
»
"
»
0.428
0.445
0.463
0.482
0.502
0.523
0.545
0.568
0.593
0.618
0.256
0.267
0.278
0.291
0.304
0.317
0.332
0.347
0.363
0.380
Ô.3Î4
348
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
TABLE X X X .
PRESENT VALUE OF AN OLD-AGE PENSION IN COURSE
OF ACQUISITION PAYABLE MONTHLY, WITH ÍNTEREST AT 3 . 5 PER CENT.
(continued)
Age of insured person
at date of calculation
of the present value
40 V2 years
41%
"
42%
"
43%
"
44% »
45%
»
46% »
47%
»
48% »
49%
"
50%
51%
52%
»
"
»
S3V.
54%
55%
56%
57%
58%
59%
»
»
»
»
"
»
60%
61%
62%
63%
64%
65%
66%
67%
68%
69%
»
»
»
"
..
»
»
»
»
"
. .
For a pension of unit,
amount payable from
age 65
For a pension of unit
amount payable .from
age 70
Males
Females
Males
Females
0.645
0.674
0.705
0.737
0.772
0.810
0.851
0.895
0.943
0.996
0.399
0.418
0.439
0.462
0.486
0.513
'0.541
0.573
0.607
0.645
0.135
0.141
0.147
0.154
0.161
0.169
0.178
0.187
0.197
0.208
0.061
0.064
0.067
0.070
0.074
0.078
0.082
0.087
0.092
0.098
1.055
1.120
1.192
1.273
Ü364
1.466
1.583
1.718
1.875
2.059
0.687
0.733
0.785
0.844
0.910
0.986
1.077
1.185
0.961
0.762
0.220
0.234
0.249
0.266
0.285
0.306
0.331
. 0.359
0.391
0.430
0.105
0.112
0.120
0.128
0.139
0.150
0.164
0.180
0.200
0.223
2.278
1.966
1.674
1.402
1.621
0.590
0.446
0.330
0.388
0.466
—
—
—
__
—
.—
—
—
0.476
0.531
0.599
0.683
0.789
0.927
1.110
1.356
1.699
2.193
0.251
0.286
0.330
0.388
0.466
0.572
0.724
0.948
1.284
1.805
T—
—
Capital Values of Old-Age Pensions awarded Each Year [8: p. 294]
In the course of the debate on the 1888 Bill a number of amendments
were considered. This is the reason why the calculation of the capital
values was made on the assumptions that the pension age would be 65
and that its amount would be fixed at 12.5 per cent, of the annual
wage.
It was assumed first that at the inception of the scheme there would
be an exceptional number of pensions awarded, the total number of
which would be given, for example for males, by ^
3YLX and secondly
65
that the normal number of pensions awarded to males in each of the
GERMANY
349
following years would be equal to the constant figure of 3Tt65. Consequently the capital values of old-age pensions which would be awarded
during each year following the coming into force of the scheme were
calculated for an average annual wage of 100, by the following formulée
(formales):
m
s£=
12.5 2
J î l x a r 2 ) and
65
m
3t\
= 12.5 ;m 66 a r i 2 >
(where t > 1) .
The figures for females were calculated in a similar manner.
CALCULATIONS IN RESPECT OF REPAYMENTS OF CONTRIBUTIONS *
The Reichstag Committee which examined the 1888 Bill introduced
a clause which provided for the compulsory repayment of contributions
in three distinct cases: this clause was embodied in the Act and has
already been referred to above 2.
First Calculation
The total amount of the repayments to be made on the death of insured
males aged x was calculated in the following manner [-8: pp. 295-297]:
The number of repayments in the case of insured males aged between
x and x + 1 is 3ilx qaa Wx where qaa represents the probability that an
insured male aged x will die in the year without having become an invalid 3 ,
and where wx represents the probability 4 that an insured man aged x
will on his death leave one or more benefit claimants, that is to say,
cither a widow or one or more orphans aged less than 15. For insured
males of all ages the probable number of repayments during the first
year of operation is then given by 6
64
2 ^ & Wx •
16
On the assumptions that the deaths all occur in the middle of the
year and that the annual amount of the contribution is fixed at 1, the
total amount of the expected repayments for the first year of operation
of the scheme is
J
64
1
More modern symbols have been substituted for those used in the original
memoranda.
2
See p. 336.
3
See above, p. 292.
4
See Chap. I, § 1, p. 301.
6
It was assumed that the old-age pension would be granted at age 65 and
that the repayment of contributions would not be subject to any waiting
period (the condition that five contribution years should have been completed
did not appear in the Bill to which this calculation related).
350
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
The calculation of the repayments for each successive subsequent year
is made on the. assumption that the insured population is stationary.
For the second year of operation of the scheme there are
2 OKx € Wx
repayments in respect of the initial insured persons, who have paid
on the average one and a half years of contribution, and
m-_
aa
,™,
aa
9tu ?i. wlt = 3VL1<S qlt ww
repayments to insured persons, who entered into insurance during the
first year of operation of the scheme and who have on the average
paid a half-year's contribution. There is, then, in total, for the second
year of operation of the scheme, on the basis of an annual contribution
fixed at 1:
Z2 = - J> J\lx qx wx + - JTt16 q
* 64
1 64
aa
= - 2, Wx qx wx + ^ ^ . 3TI» qx ze>v
In general, for the repayments made during the (t + 1) the year of
operation of the scheme, on the basis of an annual contribution fixed
at 1, there is
, 6 4
t+1 = r2¿m-xqx
, 6 4
wx + - 2¡ 3KX qx wx+
2 1T
.....
+ ~ 2 ^ <t* w*
16 + Í
For repayments on the death of an insured woman the same formulae
are applied [8: p. 297] with the substitution of
S'y, the number of insured females at age y, for 3Xlx and
w'y, the probability x that an insured woman, who dies after having
become a widow, will leave one or more orphans aged less than 15,
for wx.
For repayments to insured women who marry and cease to be insurable
the same formulae are again applied [8: pp. 298, 299] but with the
substitution of
Çy, the probability 2 that an insured woman is single at age y, for
qya and
[Ly, the probability 2 that an insured woman aged y will marry within
the year, for w'y.
1
2
See Chap. I, § 1, p. 301.
See Chap. I, § 1, p. 303.
351
GERMANY
Later Calculations [13: p. 3614 and 16: pp. 58-62]
In two later memoranda the present value of the right to repayments
of contributions on the death of an insured male, after completion of
the waiting period of four years, was calculated in the following manner.
Let
x-t-i
K
7aa
aa
to
K
=
2 D¡,
K
X
T
K
2^
- N ;
aa
^X
p r
$:- - <
^x
It is observed that if y is the annual contribution, the repayments
on the average will amount to:
4.5
-z- y in the first year following completion of the waiting period;
5 5 .
-^- y in the second year following completion of the waiting period,
and so on.
The required present value was calculated as at 1 January 1900 by
means of the following formulae:
(a) for an insured man, whose age x is less than 20, and who has
not completed the waiting period
0.5 y (4.5 a[0 + Vi) ;
(b) for an insured man, whose age x is such that 20 < x < 25 and
who has normally completed the waiting period, but who was not
aged 16 at the date of coming into force of the scheme (1 January
1891)
0.5 T
x + - - 16 ) a; +
p r
&X + 1
(c) for an insured man, whose age x is greater than 25, and who,
as a rule, was insured at the inception of the scheme.
0.5 Y (9.5 al +
p
a;+1)
,
that is, in total, for the whole population of insured males on 1 January
1900, numbering JII^. at each age x:
T1M„ = \ \ 2 JR. (4.5 Í ¿ + ps¿) +
+ jgm*
x + ^ - 1 6 ) a; +
v•x+i + ^DKX (9.5 a; + X + 1 )
352
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
For an insured man who enters into insurance in a given year the
present value of the right to repayment of contributions on death is
given by the formula
0-5 Y (a*+* +
Pa
*+=)
whence for the total number of such male entrants in a given year
18
Tc = 0.5 T 2 " X (arx+, + Vx+5) .
16
With regard to repayments on the death of an insured woman it
was thought sufficient to assume, on the basis, of actual results, that
their total cost would remain at a constant percentage (3.8 per cent.)
of the total cost of repayments on the death of an insured man. Repayments to insured women who marry and cease to be insured were not
taken into account on the assumption that in a number of cases they
would entail not an increase but a decrease in the cost of the insurance.
Consequently the present value of all repayments were taken to be
1.038 T1900
and
1.038 f
c
respectively.
CALCULATION OF PRESENT VALUES OF WIDOWS' PENSIONS
AND ALLOWANCES
First Calculation [18: pp. 534-546]
There are two distinct stages in the calculation regarding a benefit
to a widow: the present valúe is first calculated as at the date of death
of the insured person and then at any given point during his insured
lifetime.
Calculation as at the date of death of the insured person. — A calculation
is first made, as at the date of death of an insured man who leaves a
widow aged y, of the present value V y of the right to a widow's pension
or to a widow's allowance of a unit. For this purpose the group of
F y wives of insured men is considered and three distinct cases are
taken.
(1) At the death of the insured person his widow, not herself insured,
is a healthy life but it is assumed that she will not enter into insurance.
It has been seen above 1 that the number of wives in this category
expected from the group ¥y is given by the expression
•
F
«(»-f)
If one of these wives becomes a widow and later an invalid, she
will be entitled to a widow's pension whose present value will be calculated as described above a for invalidity pensions in course of acquisition.
1
2
See pp. 306-307.
See p. 342.
GERMANY
353
For this first category, then, the present value may be expressed by
the formula
F„(«-f)C»
on the basis of a pension of one unit per annum payable in monthly
!
instalments.
(2) At the death of the insured person his widow is herself insured
or in receipt of a pension: in this case she is entitled only to a widow's
allowance. The number of wives expected to belong to this category
on becoming widows is given by the expression x
r 1+
'( §)
which also represents the present value of widows' allowances of unit
amount.
(3) At the death of the insured person his widow is an invalid but
she has not yet been granted a pension. In these circumstances she
becomes immediately entitled to a pension whose present value, for a
pension of unit annual amount payable in monthly instalments, is
given by a v the calculation of which has been already described s .
The number of wives in the group Fy expected to belong to this category
on becoming widows is s
-Fa h.
F -v
r
V 7
y
,aa
The present value of this second category of pensions is then represented
by
a
«12) /
y
A
^aa hi ly\
/hi„
*»]
*»*5J
Finally the present value required is calculated by the formula
ly\
oto»
F
a /
A
/
V '
V„ =
Ç _
i
F
» S \
to»
"V
Fy
Thence the present value of the same benefit rights at age x at death
of the insured man is derived by means of the matrimonial coefficient *,
Z™, thus
V
r
1
2
3
4
See
See
See
See
Tm
= V
XÍ.V)
Y
y
^x
pp. 305-307.
p. 337.
pp. 305-307.
p. 301.
23
354
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
Calculation at any given point of the insured man's lifetime. — In
order to refer the present value obtained above to any given age in
the lifetime of the insured man, there are two hypotheses to be considered :
(1) The insured man dies without having become an invalid:
The number of deaths of healthy insured men expected from a group
of lxa healthy males at age x will be
7 aa
aa
at
K qx
h+i Çx+i
age x
at age a; + 1, etc.
If this were the only possible hypothesis, then the present value of
the benefit rights in the course of being acquired would be
^ t ! T\aa
r \ a a ' •*—i
^x
x
aa
v
«y) ?
v
(2) The insured man dies after having become an invalid.
A calculation is first made of the present value of the widow's benefit
rights in the case of an insured person aged x at the moment of becoming
invalid.
The number of deaths expected from a group of lx invalids at
age x is l
at a e x
4 Ù
S
4+1 Qx+i
a
a* g e x + I, etc.
The required present value at the date of becoming invalid is then
obtained by the formula
A- • 2 D- «£ v*<y>
where
o* = i vx.
By the same reasoning as under the first hypothesis we then pass
to the present value at any age x and obtain
— " 5 D aa *
.aa ¿^
"x
2 D* ¿ v
''x
Finally, the present value of the rights to a widow's pension and
allowance is calculated, for an insured person aged x and for a unit
annual amount, by the formula
N
d
X(U>
^£> = _ L ^
„aa
1
^aa
.^J
D aa faaa V
x
Six
v
+ i l Ñ D ¡ o1 V "\
jc(y) ~
j
/\
"x
\lx
v
x(y) J
The invalid life table t and the invalid mortality rates q* have been
borrowed from the Prussian railways pension fund. See above, p. 285.
355
GERMANY
In order to take account of amounts which increase by a unit each
year, instead of remaining constant at one unit, it is sufficient to replace
(Ú
^*x<y)
D v
^3c(y)
=
_^j
x
™x(y)
•
Proceeding in this manner all the factors were obtained which were
required for calculating the present value of the benefits granted to
widows in respect of the total insured population at the date of the
balance sheet and also in respect of future entrants into insurance.
Second Calculation [19: pp. 59-60]
The present value of the right to a widow's pension and allowance
of unit amount each at the ,time when the wife of an insured man
TABLE
X X X I . — P R E S E N T V A L U E , AT DEATH OF H U S B A N D , OF BIGHT
TO A W I D O W ' S P E N S I O N AND ALLOWANCE, W I T H I N T E R E S T
AT 3 . 5 P E R CENT.
Age of widow at
death of husband
20 years
21
22
ï
23
24
»
5
25
26
>
27
)
28
»
29
. . . .
λ
»Ï
5
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
,
»
J
»
Î
>
j
j
j
'
,
>
>
»
)
>
.»
>»
.»
.»
.
.
When pension
and allowance
are each of
unit amount
Age of widow at
death of husband
50 years
. . . .
When pension
and allowance
are each of
unit amount
1.058
1.083
1.091
1.029
0.979
0.934
0.900
0.874
0.849
0.828
51
52
53
54
55
56
57
58
59
»
»
»
»
»
»
»
»
»
2.177
2.316
2.456
2.594
2.735
2.874
3.008
3.144
3.278
3.412
0.816
0.811
0.806
0.805
0.801
0.797
0.794
0.808
0.833
0.878
60
61
62
63
64
65
66
67
68
69
»
»
»
»
»
»
»
»
»
»
3.551
3.693
3.846
4.009
4.189
4.388
4.571
4.736
4.890
5.029
0.936
1.038
1.147
1.260
1.379
1.504
1.634
1.765
1.902
2.039
70
71
72
73
74
75
76
77
78
79
»
»
»
»
»
»
»
»
»
»
-
5.154
5.262
5.338
5.371
5.352
5.285
5.176
5.044
4.895
4.740
356
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
becomes a widow at age y, is expressed by the following formula, using
ÎÏÏ.TÏ
7ÏT1A
CL
IT)
the numbers Wv , W y , W y and W y , which have been defined above 1 ,
and also the present values a of a unit invalidity pension in course of
payment and in course of acquisition:
W inp
i(i2)
.
TTTi>ns
v
aids)
.
TIT«
.
TTT'P
10,000
The numerical values obtained for W y ' at different ages y of the
widow at date of death of insured husband, with interest at 3.5 per
cent., appear in table XXXI.
The present value of the same benefit rights acquired by an insured
man aged x is calculated with the aid of fy?y by taking in turn, as in
the first calculation, the two cases where the insured first becomes an
invalid and where he dies without having become an invalid.
Below are reproduced (table XXXII) the numerical results obtained,
with interest at 3.5 per cent., to represent.
(1) the present value of the widow's pension and allowance together,
each of unit amount, in respect of an invalid at any given age;
(2) the present value of the widow's pension and allowance together
i n •pacmo/>f n f QTÍ í n a n r o r í n o p o n n a t o m r m v o T ï aero r\n t . h a a c o i i m n .
tions (a) that the amount of each benefit is constant and equal
to a unit and (li) that the amount of each benefit increases by
one unit for each contribution year.
CALCULATION OF PRESENT VALUES OF ORPHANS' PENSIONS
AND ALLOWANCES 3 [18: pp. 546-547]
The present value of a unit orphan's pension in the course of payment,
ceasing at age 15, is calculated on the basis of the children's life-table lz
by means of the commutation functions D z = lz vz and
• Nz = 2 D;z
z
and
\vs-z&z —
p.
z
or, taking into accountthe-payment in-monthly-instalments,-by,|ie-zaz
1
2
3
— |i»-zaz — 0.463
See pp. 311-312.
See above, pp. 337 and 342.
More modern symbols have been substituted for those used in the original
memoranda.
357
GERMANY
TABLE XXXII.
PRESENT VALUE OF THE RIGHT TO A WIDOW'S PENSION
AND ALLOWANCE IN RESPECT OF AN INVALID OR INSURED PERSON AT
. ANY AGE, WITH INTEREST AT 3 . 5 PER CENT.
Age of invalid or insured person
at date of calculation
of the present value
In respect of
when pension
and allowance
are each of
unit amount
In respect of an insured
persor when
pension and
pension and
allowance
allowance
increase by
are each of
one unit for
unit amount each year of
contribution
17%
18%
19%
»
»
"
—
—
—
0.349
0.362
0.376
0.390
12.628
13.103
13.600
14.119
20%
21%
22%
23%
24%
25%
26%
27%
28%
29%
»
»
»
«
»
"
»
»
»
"
0.080
0.117
0.162
0.214
0.267
0.316
0.358
0.392
0.421
0.447
0.405
0.421
0.437
0.453
0.470
0.488
0.505
0.523
0.542
0.561
14.662
15.019
15.164
15.300
15.425
15.540
15.643
15.735
15.815
15.883
30%
31%
32%
33%
34%
35%
36%
37%
38%
39%
»
"
»
»
»
»
»
»
»
»
0.468
0.488
0.507
0.527
0.547
0.569
0.595
0.625
0.662
0.706
0.581
0.602
0.623
0.645
0.668
0.692
0.716
0.742
0.769
0.796
15.938
15.979
16.006
16.016
16.008
15.983
15.937
15.871
15.782
15.669
40%
41%
42%
43%
44%
45%
46%
47%
48%
49%
»
»
»
»
»
»
»
»
»
»
0.755
15.532
0.867
0.926
0.984
1.040
1.095
1.151
1.207
1.261
0.825
u.oo*
0.885
0.916
0.948
0.980
1.013
1.047
1.081
1.115
15.182
14.969
14.732
14.470
14.184
13.875
13.544
13.191
50%
51%
52%
53%
54%
55%
56%
57%
58%
59%
»
»
»
»
»
»
»
»
»
»
1.311
1.358
1.400
1.436
1.470
1.502
1.530
1.553
1.570
1.584
1.149
1.183
1.215
1.248
1.280
1.311
1.342
1.371
1.399
1.425
12.817
12.424
12.010
11.577
11.121
10.646
10.153
9.646
9.128
8.600
. . . . . . . .
. ,
.
.
.
U.ÖU»
. . . . . . .
•
. . . .
. .
ÍO.O/V
358
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
TABLE X X X I I . — P R E S E N T VALUE OF T H E RIGHT TO A W I D O W ' S P E N S I O N
AND ALLOWANCE IN RESPECT OF AN INVALID OR I N S U R E D P E R S O N AT
ANY A G E , W I T H I N T E R E S T AT 3 . 5 P E R CENT,
(continued)
at date of calculation
of the present value
In respect of
an invalid
when pension
and allowance
are each of
unit amount
,
In respect of an insured
person when
pension and
pension and
allowance
increase by
allowance
are each of
one unit for
unit amount each year of
contribution
»
»
»
»
»
»
»
"
1.598
1.611
1.620
1.626
1.628
1.626
1.623
1.620
1.617
1.612
1.452
1.477
1.500
1.520
1.538
1.553
1.566
1.577
1.587
1.596
8.064
7.523
6.981
6.443
5.912
5.392
4.887
4.396
3.922
3.464
70%
71%
72%
73%
74%
75%
76%
77%
78%
79%
»
"
»
»
»
»
"
»
»
»
1.606
1.600
1.591
1.577
1.555
1.526
1.488
1.442
1.391
1.335
1.604
1.610
I.bi3
1.608
1.595
1.573
1.541
1.501
1.454
1.400
3.024
2.607
2.226
1.887
1.602
1.379
1.198
1.031
0.877
0.730
80%
81%
82%
83%
»
»
»
»
1.273
1.205
1.133
1.058
1.340
0.584
—
—
—
—
—
—
60% years
ei %
"
62%
63%
64%
65%
66%
67%
68%
69%
. . . . . . . .
The present value, at the date of death of an insured man aged x, of
the right to unit orphans' pensions is given b y '
15
R
x
^(12)
115-zaz
z=t>
"XX
•where, at each age x the symbols kx represent, for a number of fathers
~M-X— the-number-of~children"living alrages~z~from~0~to~14~and where ~~
y¡x is the probability that an insured man is the father of a child under
age 15 x.
The calculation of the present value of the right to unit orphans' pensions
at any given point in the lifetime of the insured man is analogous to that
•which has been made for widows' pensions.
1
See above, pp. 313 and 315, and tables XVIII and XIX.
359
GERMANY
Two alternative assumptions are made:
(1) The insured man dies without having become an invalid.
p.aa
aa
*^X
9x
(12)
IS^JCIZ)
',
(2) the insured man dies after having become an invalid:
• ^
p. i
or ix -s
Representing by
vO(12)
1 B D^''
i
(12)
Di
'X
the sum of these two results and taking
iy.a(i2)
" ^
-p.a(i2)
X
the present value required is given by the formula
Na<i2>
is11*«)
a(i2)
aa
If instead of being a fixed unit amount the pension is assumed to
grow by a unit for each contribution year the formula becomes
•^b
A
/T
\a(12)
ìxm
Na(12)
_ ^ ^ 15 i, 3C(Z)
_x
~
Dr
-OU2)
16^XI.Z)
~ Dr '
The calculations in respect of orphans' allowances are made with the
help of the same formulae, but substituting for i16_zaz
the ratio -p—,
which represents the present value, for a child aged z, of a unit allowance payable on his attaining age 15.
As an illustration are reproduced from a later memorandum [19:
pp. 41-42] the numerical results giving, at 3.5 per cent, interest, the
present value of the right to an orphan's pension ceasing at age 15
and the present value of the right to an orphan's allowance payable
at age 15, when the calculation of each of these values is made:
(1) in respect of an invalid at any given age, for a benefit of unit
amount ;
(2) in respect of an insured man at any given age, for a benefit of
unit amount;
(3) in respect of an insured man at any given age, for a benefit
whose amount increases by one unit for each contribution year.
360
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE XXXIII (a).
PRESENT VALUE OF THE RIGHT TO AN ORPHAN'S
PENSION CEASING AT AGE 1 5 , WITH INTEREST AT 3.5 PER CENT.
Age of invalid or insured person
at date of calculation
of the present value
17%
"
is%
»
19%
"
20%
21%
22 %
23 %
24%
25%
»
»
»
»
"
"
In respect
of an invalid
when pension
is of unit
amount
In respect of an insured
person when
pension
is of unit
amount
pension
increases by
one unit for
each year of
contribution
_
—
—
—
0.854
0.886
0.920
0.955
16.753
17.383
18.043
18.732
0.992
1.030
1.068
1.107
1.146
1.183
1.218
1.249
1.274
1.294
19.453
19.690
19.385
19.031
18.627
18.171
17.665
17.111
16.514
15.876
261/2
»
27%
28%
29%
»
»
»
0.621
0.940
1.384
1.980
2.734
3.601
4.553
5.533
6.453
7.283
30%
31%
32%
33%
34%
35%
36%
37%
38%
39%
»
»
»
»
»
»
»
»
»
»
7.956
8.430
8.728
8.834
8.766
8.535
8.121
7.590
7.015
6.420
1.307
1.312
1.310
1.302
1.287
1.265
1.237
1.203
1.166
1.125
15.205
14.506
13.785
13.048
12.300
11.546
10.794
10.048
9.313
8.592
40%
41%
42%
43%
44%
45%
46%
47%
48%
49%
»
»
»
»
»
»
»
»
>•
»
5.825
5.225
4.652
4.146
3.695
3.283
2.893
2.522
2.197
1.919
1.081
1.033
0.983
0.933
0.881
0.827
0.771
0.713
0.657
0.603
7.888
7.206
6.555
5.921
5.321
4.753
4.221
3.728
3.273
2.854
50%
51%
»
"
1.660
1.424
0.548
0.495
2.474
2.131
5-¿%
"
1.048
0.895
0.763
0.645
0.536
0.437
0.352
0.398
0.354
0.313
0.276
0.240
0.207
0.178
1.550
1.307
1.015
0.836
0.682
0.550
0.438
53%
54%
55%
56%
57%
58%
59%
»
»
»
»
»
»
»
• •
. . . . . . . .
. ' . . . . . . . .
. . .'
•
361
GERMANY
TABLE XXXIII (a).
PRESENT VALUE OF THE RIGHT TO AN ORPHAN'S
PENSION CEASING AT AGE 1 5 , WITH INTEREST AT 3.5 PER CENT.
(continued)
In respect of an insured
person when
In respect
of an invalid
when
allowance
Is of unit
amount
allowance
is of unit
amount
allowance
increases
by one unit
each year of
contribution
6 0 % years
61%
»
62%
»
63%
64%
65%
'
66%
J
67%
68%
69%
'
0.283
0.227
0.180
0.143
0.112
0.085
0.062
0.042
0.025
0.012
0.152
0.130
0.109
0.091
0.075
0.059
0.044
0.031
0.019
0.009
0.343
0.263
0.197
0.142
0.097
0.062
0.036
0.018
0.007
0.002
70%
0.003
0.003
Age of invalid or insured person
at date of calculation
of the present value
Ï
Ï
Ì
Ì
TABLE XXXIII (b).
PRESENT VALUE OF THE RIGHT TO AN ORPHAN'S
ALLOWANCE PAYABLE AT AGE 1 5 , WITH INTEREST AT 3.5 PER CENT.
Age of invalid or insured person
at date of calculation
of the present value
In respect
of an invalid
when allowance
is of unit
amount
1 6 % years
17%
»
18%
"
19%
»
20%
21%
22%
23%
24%
25%
26%
27%
28%
.29%
....
»
»
»
»
»
»
»
»
»
»
0.082
0.120
0.172
0.236
0.313
0.400
0.493
0.590
0.689
In respect of an insured
person when
allowance
is oi unit
amount
allowance
increases by
one unit for
each year of
contribution
0.117
0.122
0.126
0.131
2.549.
2.646
2.746
2.851
0.136
0.141
0.147
0.152
0.158
0.163
0.169
0.174
0.179
0.183
2.961
3.004
2.974
2.938
2.895
2.844
2.787
2.723
2.652
2.574
362
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
TABLE X X X I I I (£>)•
P R E S E N T VALUE OF THE RIGHT TO AN O R P H A N ' S
ALLOWANCE P A Y A B L E AT AGE 1 5 , W I T H I N T E R E S T AT 3 . 5 P E R CENT.
(continued)
Age of invalid or insured person
at date of calculation
of the present value
In respect
of an invalid
allowance
is of unit
amount
In respect of an insured
person when
allowance
is of unit
amount
allowance
increases
by one unit
each year of
contribution
0.782
0.866
0.940
1.000
1.042
1.061
1.056
1.032
0.991
0.940
0.187
0.191
0.193
0.195
0.196
0.196
0.195
0.193
0.190
0.187
2.490
2.400
2.304
2.203
2.098
1.989
1.877
1.764
1.649
1.533
31%
32 %
33%
34%
35%
36%
37%
38%
39%
"
40 V»
41%
42%
43%
44%
45%
46%
47%
48%
49%
»
»
»
»
»
»
»
»
»
0.879
0.813
0.747
0.684
0.623
0.564
0.507
0.455
0.409
0.365
0.182
0.177
0.171
0.164
0.157
0.149
0.141
0.132
0.123
0.114
1.418
1.306
1.193
1.084
0.978
0.876
0.780
0.688
0.602
0.521
50%
51%
52 %
53%
54%
55%
56%
57%
58%
59%
»
»
»
»
»
»
»
»
»
»
0.322
0.279
0.240
0.207
0.178
0.152
0.127
0.104
0.083
0.064
0.105
0.095
0.085
0.076
0.067
0.058
0.050
0.043
0.036
0.029
0.447
0.380
0.320
0.266
0.218
0.176
0.140
0.109
0.083
0.062
60%
61%
62%
63%
64%
»
"
»
»
»
66%
67%
68%
69%
»
»
»
»
0.048
0.035
0.025
0.018
0.013
0.UU8
0.005
0.003
0.002
0.001
0.023
0.018
0.014
0.011
0.008
07005
0.004
0.002
0.001
0.001
0.045
0.032
0.022
0.014
0.009
0.005
0.003
0.001
»
»
»
»
»
»
»
. . . . . . . . . .
. .
—
—
GERMANY
363
EXPERIENCE
Average Amounts of Benefits
The average annual amounts for invalidity and for old-age pensions
respectively are given by the following figures.
TABLE X X X I V . — AVERAGE ANNUAL AMOUNT OF PENSIONS'. E X P E R I E N C E
(in marks)
Year
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
. . .
.
.
.
.
.
.
.
.
.
.
.
Invalidity
pensions
Old-age
pensions
113
115
118
122
125
127
130
132
132
142
146
150
124
128
130
126
133
134
137
139
143
146
150
153
Year
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
Invalidity
pensions
Old-age
pensions
152
155
159
163
166
170
175
177
180
187
195
155
157
159
161
162
163
164
164
165
166
167
. . .
.
.
.
.
.
.
.
.
.
.
During the years 1912 and 1913 the average annual amount of widows'
pensions was 77 and 78 marks respectively, and that of orphans'
pensions was 32 marks in each year.
The average amount of repayments of contributions has been continually increasing in each category; the figures given below indicate
the extent of these increases:
Average payment in marks
Repayment of contributions on death . . .
Repayment of contributions on marriage . .
Repayment of contributions on the granting
of a pension under the workmen's compensation scheme
year 1900
49
32
year 1909
95
39
47
95
Total Amount paid Each Year for Each Category of Benefit
The sums paid out each year for invalidity and old-age pensions
and for all repayments of contributions appear in table XXXV.
Further, the following total amounts were paid during the years
1912 and 1913 respectively:
(1) widows' pensions: 167 and 801 thousand marks;
(2) orphans' pensions: 629 and 2,573 thousand marks.
364
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE XXXV.
TOTAL AMOUNT PAID EACH YEAR IN RESPECT OF THE
VARIOUS BENEFITS: EXPERIENCE
(in thousands marks)
Year
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
Invalidity
pensions
(including
sickness
pensions)
_
. . . . .
1,339
5,207
10,032
15,333
20,845
27,061
34,363
42,368
54,224
66,322
80,377
95,035
107,981
117,427
124,618
130,281
136,338
142,716
148,977
154,505
161,811
170,750
Repayments
of
Contributions
15,299
21,025
22,706 .
24,420
26,497
27,327
27,556
27,450
26,826
26,224
24,656
23,507
22,113
20,868
19,476
18,355
17,312
16,353
15,550
15,011
14,468
14,053
13,738,
_
—
—
—
219
1,975
3,391
4,497
5,446
6,617
6,925
7,134
7,556
7,858
8,172
8,436
8,855
9,237
9,420
9,430
10,246
1,970 1
6201
Total
15,299
22,364
27,913
34,452
42,049
50,147
58,008
66,310
74,640
87,065
97,903
111,018
124,704
136,707
145,075
151,409
156,448
161,928
167,686
173,418
179,219
177,834
185,108
i Although the repayment of contributions was abolished as from 1 January 1912,
the above sums were paid retrospectively during the years 1912 and 1913.
§ 4 . — Other Expenditure
ADMINISTRATION EXPENSES AND COST OF MEDICAL AID
Estimates adopted in the Actuarial Investigations
—In- the--actuaria]-investigations-undert.aken-Avhile-the-i899-Act-was
being formulated [16: pp. 61, 62] the total cost of administration
expenses and medical aid was estimated at 6.94 per cent, of the contribution income, according to the actual experience of the year 1897.
In a later memorandum [18: pp. 554-556] administration expenses
and the cost of medical aid were A^alued separately, on the basis of
the experience in the years 1904 to 1907. The average annual cost per
insured person was estimated to be 1.3449 for administration expenses
and 1.1467 for the cost of medical aid.
365
GERMANY
Finally, in a 1914 memorandum [19: pp. 71, 72] on the basis of the
1909-1913 experience, the percentage of the contribution income taken
for administration expenses was 8.5 and for the cost of medical aid 10.
Experience
The sums expended annually for administration and medical aid
appear in table XXXVI, which also allows a comparison to be made
between administration expenses and the total receipts or the total
expenditure.
TABLE XXXVI.
ADMINISTRATION EXPENSES AND COST OF MEDICAL A I D :
EXPERIENCE
Administration expenses
'
Year
Cost of
medical
aid
Annual
amount
(in thousand marks)
,
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
. . . . . .
32
108
365
632
1,176
1,886
2,630
4,016
5,664
7,369
9,396
10,450
11 649
13,144
14,630
16,443
19,548
21,344
23,408
24,646
26,562
29,851
3,838
4,776
4,952
5,267
5,889
6,420
6,879
7,672
8,580
10,029
10,676
11,694
12,552
13.745
14,700
15,864
16,901
18,254
19,661
21,367
21,854
23,481
24,408
Percentage
of total
annual
expenditure
Percentage
of total
annual
receipts
%
%
29.2
26.3
22.8
20.0
18.5
16.5
15.2
14.6
14.2
13.7
13.0
12.4
11.8
4.0
4.8
4.8
4.8
5.1
5.1
5.2
5.5
5.7
6.4
6.4
'6.8
6.9
11.7
7.1
11.7
11.9
12.0
12.2
12.5
12.8
12.6
13.4
13.2
7.2
7.4
7.5
7.8
8.1
8.4
8.1
6.8
6.8
366
ACTUARIAL T E C H N I Q U E
ANP
FINANCIAL
ORGANISATION
TABLE OF SYMBOLS INTRODUCED IN CHAPTER II
CO
= Limiting age of the life table.
i
= Annual interest on a monetary unit.
= Discounting factor,
l + i
— Commutation functions corresponding to lx •
D : N;
<M(52)
u
qa(52)
i-x, n-x\
¥
= Present values of a unit contribution
weekly.
payable
= Present value of the expected contributions in
respect of an insured man aged x, on the basis
of a weekly payment equal to one unit.
a
* i
a
M+ft
= Present values of a unit invalidity pension in course
of payment.
ex
= Present value of a unit invalidity pension at age x,
at which it is granted.
w„
= Invalidity rate due to industrial accidents
(ux = kix)
D
i *j^ai<i2) «gatus) _ c o m m u t a t j o n functions used in calculating the present value of an invalidity pension in course of
acquisition.
= Present value of a unit invalidity pension in course
of acquisition (payment by monthly instalments).
3>v
= Present value of the invalidity pension.
C
D
at(i2)
1
-.aida) „aida)
* ' x
«a,
<%x (g,m)
=
Commutation functions used in calculating the
present value of an invalidity pension in the
course of being acquired.
^^"Present"vaíue^of a u n i t invalidity pension~in course^
of acquisition (payment by monthly instalments,
4 years' waiting period).
= Another present value of the invalidity pension
(g represents the amount of the basic sum and
m the amount of the increment corresponding to
a contribution year).
GERMANY
367
Present value of the right to a unit old-age pension
granted at age 70 (payment by monthly instalments).
70 -xfi-X
í£
= Present value of the old-age pension.
m
fCi
m
tu>i
' '
'•
~ C a Prtal value of invalidity pensions granted, during
the ith year of operation, to insured men (for a
fixed unit amount and for the amount provided
in the Bill).
f nrx fnpiv
' '
'
= Capital value of invalidity pensions granted during
the ith year of operation to insured women (for
a fixed unit amount and for the amount provided
in the Bill).
m
= Capital value of old-age pensions granted during
the ith year of operation to insured men (for the
amount provided in the Bill).
Mna
'
fftpi
'
= Capital value of old-age pensions granted during the
ith year of operation to insured women (for the
amount provided in the Bill).
2f
= Amount of repayments to be made during the ith
year of operation on the death of insured men.
T\r
j\jr Sr
* ' *' *
— Commutation functions used in calculating the
present value of. the right to repayments of
contributions made on the death of an insured
man.
r
*
= Present value of the right to repayments of contributions made on the death of an insured man,
for a unit amount.
P„T
= Present value of the right to repayments of contributions made on the death of an insured man,
for an amount which increases by one unit for
each contribution year.
x
T
= Present value of the right to repayments of contributions in respect of the male insured population
at 1 January 1900.
f
= Present value of the right to repayments of contributions in respect of insured men who enter
during the year.
V
'v
= Present value calculated as at the date of death of
the insured man, according to the age y of the
widow, of the right to a widow's unit pension and
unit allowance.
368
ACTUARIAL TECHNIQUE AND FINANCIAL
' x(y)
DÌ
Ky> > ^xiy)
'•»(y)
ORGANISATION
Present value calculated as at the date of death of
the insured- man, according to his age x, of the
right to a widow's unit pension and unit allowance.
Commutation function corresponding to the invalid
life-table t .
Commutation functions used in calculating the
present value of the right to a widow's pension
and allowance.
Present value of the right to a widow's pension and
allowance of unit amount.
W„
Present value calculated as at the death of an
insured man in respect of his widow aged y, of
the right to a widow's unit pension and unit
allowance.
D,,N2
Commutation functions, corresponding to the children's life-table lz.
\¡s-z&z
Present value of a unit orphan's pension in course
of payment, ceasing at age 15 and payable in
monthly instalments.
Present value, as at the death of an insured man
aged x, of the right to unit orphans' pensions
ceasing at age 15 and payable in monthly instalments.
w'-'xiz)
Commutation function used in calculating the
present value of the right to unit orphans'
pensions, ceasing at age 15, at any given point
in the lifetime of an insured man (payable in
monthly instalments).
Present value of the right to unit orphans' pensions,
ceasing at age 15, at any given point in the lifetime of an insured man (payable in monthly
instalments).
.(la)
15\* "-IXU)
Present value of the right to orphans' pensions,
ceasing at age 15, calculated at any given point
in the lifetime of an insured man, when the
amount of the pension increases by one unit for
each contribution year (payable iñTliioñthly^
instalments).
CHAPTER III
FINANCIAL SYSTEM
At the time of the preparatory investigations and during the operation
of the scheme, the financial system was the subject of important
actuarial researches to which reference has already been many times
made and which, indeed, form the fundamental basis of the present
survey. The principal purpose of these researches was to choose the
appropriate rates of contribution that would ensure financial equilibrium.
The essential problem has always been to value the items composing the
Assets and Liabilities in the actuarial balance-sheet: from this calculation
could be deduced the amount of the average premiums required to balance
assets and liabilities or alternatively the actuarial balance-sheet could
be completed by taking into account the rates of contribution actually
in force.
Under the provisions of the Government Bill of 1888, the rates of
contribution had to be fixed on the basis of general average premiums
required to secure financial equilibrium provided that the initial insured
population is taken together with the new entrants into insurance
during each of the years of operation of the scheme [7, 8].
During the investigations of the Reichstag committee this principle
was abandoned and it was decided that the contributions should be
fixed for a certain period so that it would be possible to set up the
capital values of the pensions emerging in the period, and, at the same
time, cover all other expenditure. The rates were first calculated for
a period of ten years and, later, they were to be revised every five
years. In other words, average premiums for a fixed period were substituted for the general average premiums. The average premiums
calculated for a period of ten years served as a guide in choosing the
rates of contribution put into force in 1891, which were fixed for the
various wage classes so as to guarantee financial equilibrium for each class
taken separately [8, 9, 10].
In the actuarial memoranda on which the 1897 and 1899 Bills were
based, different average premiums were brought out, but in the end,
on the basis of the figure obtained by the overall average premium,
it was decided to introduce a new wage class * and to retain the rates
in force in the other classes for a period of ten years from 1 January
1900 [13, 16].
When insurance benefits to survivors were introduced the general
average premiums were re-calculated and this led to an increase in the
rates of contribution * [18].
1
See p. 326.
24
370
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Finally, an actuarial balance-sheet was constructed as at 1 January
1914 and this indicated that the rates of contribution put into force
on 1 January 1912 should be retained [19].
In the following pages a brief analysis will be made in chronological
order of the calculations of average premiums and the actuarial balancesheets which were drawn up in the course of the various actuarial
. investigations. It will be seen that certain of these investigations provided material for solving not only the problem of financial equilibrium
but also other important questions : in particular they led to an estimate
of the annual emerging costs, of the sums provided by the State (year
by year and present value) and of the growth of the accumulated funds.
§ 1. — Calculation of Average Premiums in the Preparatory
Investigations*
GENERAL AVERAGE PREMIUMS [7: pp.
100-103]
In respect of the Initial Insured Population
Taking the initial male insured population, at each age x the number
of insured persons was represented by Jtt x . For this group, the present
value of a uniform annual contribution of 7tj was 2
CO
^Ì-2J
2ft* r* •
18
The present value of benefit payments in respect of the same group
was 3
2 2H* I** + <) •
16
Hence financial equilibrium in respect of this group necessitated an
average premium for the initial population:
CO
2 ^ft, {< + O
•'»
co
2™*r«
16
A similar procedure was adopted for the initial female insured
population.
1
In all these calculations the basic rate of interest is taken as 3.5 per cent.
Yx is calculated for a unit annual contribution in the same way as Cx
for3 a unit weekly contribution. For the calculation of Cx see p. 327.
See Chapter II. The formulae reproduced correspond with the original
form of the 1888 Bill, under which no provision was made for repayment of
contributions.
2
371
GERMANY
It was then observed that the adoption of TC¿ as the amount of the
average premium would imply that insured persons entering after the
first year, that is to say, future entrants, would have the same age
distribution as the initial entrants. It appeared more reasonable,
however, in view of the compulsory nature of the scheme, to assume
that future entrants would be mainly young people.
In respect of Future Entrants
It was assumed that the total number of male entrants each year
would have the following constant composition:
m
at a
9Us
ge
16
m
at age 17
m r
at age 18
dl17
3 Lls
The numbers ¿ft^,
¿ft17 and £)t18 were derived from the distribution of the initial insured population at •the ages in question 1.
The present value of unit contributions in respect of male insured
persons who enter during the first year is represented by
18
v^m3lxTx
16
and the present value of benefit payments in respect of the same persons
*>y
18
16
on the assumption that they all enter in the middle of the year.
Actuarial equilibrium in respect of these persons would have necessitated the following average premium, which has been taken as the
average premium applicable to the new entrants in future year (for
males) :
18
,w
;
is
16
The same procedure was adopted for future female entrants.
In respect of Present and Future Insured Persons together
The average premium applicable to future entrants, TZf, was less
than the average premium in respect of the initial insured population,
1
See p. 320.
372
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
7tj, since the age distribution of the latter was less favourable than
that of the former. In a compulsory social insurance scheme, which
is assumed to continue in perpetuity, it is certain that each year a
number of new entrants will be added to the insured population and
that this number will be almost entirely composed of young persons.
Accordingly, the initial insured population and future entrants were
considered together for the purpose of calculating a general average
premium which would be applicable to all insured persons. .The
resulting'premium ng so defined evidently lay between TZ¿ and 7t¿ and
it was obtained, on the assumption that the number and age distribution
of new entrants each year would remain unchanged, by the formula
6)
18 .
16
JR. vx
18
3
+ v* 2 "X r, + w- 2 > . r, +
16
10
or
2 on, « + o +.—— 2 m ^ « + <)
In
it»
J-
v
p*
lfi
18
2 ¿m* rx + - — 2 "^ r*
16
.x
^
16
The same procedure was adopted for calculating the general average
premium applicable to females.
AVERAGE PREMIUMS FOR A FIXED PERIOD [8:
pp.
299-300]
After much discussion, the adoption of a general average premium,
which had at first been considered, was rejected, mainly owing to the
fear that it might lead to too great an accumulation of funds. The
following system was substituted for that originally envisaged. The
period of operation of the scheme is divided into quinquennial periods,
except for the first which is decennial, and in each period the income
is equated to the outgo in respect of (1) the setting-up of the capital
values of pensions awarded in the period and (2) the repayments of
contributions and miscellaneous expenditure.
At the beginning of a period let
& = 2 &* »
the total male and female insured population 1, which is assumed to
be constant, and let ß be the average annual premium, expressed as
a percentage of wages, which is to be calculated for this period. Then
1
On the assumption that Sx = JKX + 9X.
373
GERMANY
the present value of contributions at the beginning of the period will
be, for an average annual wage of 100,
1 — V10
fig
vi
1 — V r '
1 — Vs
Vi
r8 &
1 —v
if the period is one of ten years, and
if the period is one of five years.
In Chapter II * a broad description was given of the calculation of
the capital values, for an average annual wage of 100,
3Ct, 9tt in respect of invalidity pensions awarded in each year
of the operation of the scheme, and
3it, 3ti in respect of old-age pensions awarded in each year of
the operation of the scheme.
The present value, at the commencement of the period concerned,
of the cost of setting up these capital values, for an average annual
wage of 100, is obtained by taking
2 vt+i Cae\ + 'xi + m3e% + '¿O
0
for the first period and
2 ^t+i (m3ci + W + m< +1<)
0
o
for each of the other periods.
A similar procedure is adopted for the repayments of contributions.
Let ^¡ be the total amount of the three categories of repayments of
contributions made during the rth year of operation, calculated on
the basis of an anaual contribution fixed at 1. The present value of
these repayments, on the basis of an average annual wage of 100, is
given by the formula
9
ß 2vt+i % for the first p e r i o d ' a n d
0
4
ß ^ y Vt+i % for each of the other periods.
1
See pp. 345-346 and 348-349.
374
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
• Finally, the average premium in respect of the period considered,
expressed as a percentage of wages, is
2 »' (M + f^t +. m< + '<)
ßo =
1 — V"
¿J
1_
&
v
-á
^
for the first period and
2 »' ex* + x* + *xa + 'o
1 -
Ü6
«
- — & - 2 »' 't
for each of the other periods.
It is possible t o give effect to changes in the insured population by
giving to & different values in the calculation relating to each period.
In this way the following figures applicable to the first decennial
period were obtained:
4.453
6.625
7.919
9.715
for
„
„
„
the first wage class
,, second „
„
„ third
„ fourth
,,
„
From these figures the average premiums applicable to the first
decennial period were obtained by increasing them by 20 per cent.
in order to build up a reserve fund and by adding 1 mark to each in
order to cover the cost of administration. The following premiums
were thus obtained:
6.344 marks in
8.950
„
„
10.503
„
„
12.658
„
„
the first wage class
,, second „
,,
„ third
„
„ fourth
„
.,
AVERAGE PREMIUMS FOR THE NORMAL PERIOD [10:
pp.
3-7]
The normal period is assumed to be attained when each insured
person may be deemed to have entered at age 16 and when the insured
population may be deemed to be stationary, that is to say, constant
as regards both numbers and age distribution. Consequently, when
the insurance scheme has attained its normal position each insured
1
person at age x will have paid about x + K — 16 yearly contributions.
On the basis of an annual invalidity pension consisting of (1) a fixed
portion of 60 marks and (2) increments equal to m for each contribution
week (assuming 47 weekly contributions are paid each year), the capital
375'
GERMANY
value of invalidity pensions granted during a year to insured males is
expressed l by
<0
tú
A
/
60 2 ^ K ex + 47 m 2 (* + o "
\
16
) ^ ** e* •
On the basis of an old-age pension of constant amount r commencing'
at age 70, the capital value of old-age pensions awarded during a year
to insured males is given by
'
~n
oa(i2)
C/1C70 3*70
The calculation of the present value of all pensions awarded during
a year for each wage class separately is made by giving to m and r
their respective numerical values. The same procedure is adopted for
females and finally a total H„ is obtained which represents the capitalised value of invalidity and old-age pensions awarded to men and women
in all wage classes.
The total amount of repayments of contributions, in respect of an
annual contribution fixed at 1, is given by the following expression
which is deduced from the formulae reproduced above 2 , since every
repayment at age x, in the norma] period, covers the same number of
1
contributions, x -f- K — 16.
3» = 2 (* + ¿-16)
+ 2 (y + \ -16)9*
m
*?" a w*+
Ï™ w'y + 2 (y + \ -16)
*» 4 H» •
The present value of the contributions paid during a year, on the
basis of an annual contribution fixed at ß n paid in the middle of the
year, is given by the formula
^"12^ + 2 ^ .
where 3KLX and &>y represent the numbers of male and female insured
persons at age x ànd y respectively, which are assumed to remain
constant in the normal period.
1
<3X represents the present value of a unit invalidity pension at age x, at
which
it was awarded. See above, p. 340.
2
See pp. 349-350. It should be observed, however, that in the expression
used here account is taken of the period offiveyears during which contributions
must have been regularly paid in order that the repayment may be granted.
S76
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Finally, for any year in the normal period, the equation of the
contribution income to the capitalised value of the pensions awarded,
account being taken of the repayments of contributions, produces the
average premium for the normal period:
ft.-
»•(2 ^ + 2 * . ) - j 3.
In this way the following annual figures were obtained:
9.0621 marks for the first wage class
16.2729
„
„ „ second „
„
21.8683
„
„ „ third
„ 29.2367
„
„ „ fourth
„
to which one mark was added to cover administration expenses.
§ 2. — Average Premiums and Annual Estimates calculated
as at 1 January 1900
PRESENT VALUE OF COST OF BENEFITS
In order to construct the actuarial balance-sheet and at the same
time to determine the average premiums it was necessary to calculate:
(1) the present value of invalidity and old-age pensions in course
of payment on 1 January 1900;
(2) the present value of invalidity pensions in course of acquisition
in respect of (a) the insured population on 1 January 1900;
and (b) entrants into insurance in the year 1900 and subsequently;
(3) the present value of old-age pensions in course of acquisition
in respect of (a) the insured population on 1 January 1900;
and (b) entrants into insurance in the year 1900 and subsequently;
(4) the present value of repayments of contributions in respect of
(a) the insured population on 1 January 1900 and (¿>) entrants
into insurance in the year 1900 and subsequently.
Invalidity and Old-Age Pensions in Course of Payment [16: pp. 44-50]
The present value of invalidity pensions in course of payment on
1 January 1900 has been calculated with the aid of the distribution
of these pensions according to year of award and also of a capitalising
factor representing the average present value of invalidity pensions
awarded during a given year. .
377
GERMANY
In a previous calculation the following average present values 1 had
been applied to the invalidity pensions in force on 1 January 1897:
1
for pensions which had been in force for y year on the average,
r
'
i
~2 LaM +
a*
"i
M+iJ
3
for pensions which had been in force for — years on the average,
"2" L a M+i +
a
M+2j
9
and so on up to pensions which had been in force for ^ years on the
average. In this way capitalisation factors i ¿}m were obtained representing the average present value of a unit invalidity pension in force,
on January 1897, which had been awarded -^ years previously.
In order to obtain factors applicable to pensions in force on 1 January
1900, graphic extrapolation was used to extend the series of factors
which had been calculated when t = 1, 3, ... 9, to cover values of I
it1m
equal to 11, 13 ... 17. It was sufficient to apply these factors to the
numbers ¿J1900_i_n of pensions in force on 1 January 1900, which had
1
t
been awarded during the year 1900 — ^ — — and to sum
17
2
i
it'm
• -y*1 9 0 0 - i —t-
in order to obtain the present value of invalidity pensions in force on
1 January 1900, on the basis of a fixed unit amount. As regards increments, each of the preceding values was multiplied by the average
amount of the increment according to year of award, obtained from
experience, and then these results were added together to produce
m
X
3
' -idm- 3 1900-J• —'
it'Til '
1900-i-—
The total result was therefore represented by the formula
17
17
Qlo = s • 2 iL • ¿L-ì-±+
2
m
i™-ì-±.ìtjm • "»-*
1«3
The present value Q1900 of the old-age pensions in force on 1 January
1900 was obtained in a similar manner.
1
The expression a1
has been defined in Chapter II : see p. 337.
378
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
Invalidity Pensions in Course of Acquisition [16: pp. 50-54]
The calculation has been made on the basis of a waiting period of
four years by means of the formulae reproduced in Chapter II K
As regards the insured population on 1 January 1900, the calculation
rests on the following two fundamental present values:
Present Value of a Fixed Portion of Unit Amount
(a) in respect of an insured person, whose age x is less than 20, and
who has not completed the waiting period,
ai(i2)
N on
D°a
(b) in respect of an insured person, whose age x is equal to or greater
than 20 and who has normally completed the waiting period,
N;1""'
1c
or, in total, for the total number
16
of males and females, forming the insured population on 1 January 1900,
c
19
^(»(12)
<a
iß
L/~.
on
^01(12)
\-j'
v
Present Value of an Increment which increases by One Unit for Every
Contribution Year
(a) in respect of an insured person, whose age x is less than 20 and
who has not completed the waiting period,
'
4.5 N 2 a r + Sf 12 '
or
(¿>) in respect of an insured person, whose age a: is such that 20 < x < 25
and who has normally completed the waiting period but who was not
16 years old on 1 January 1891, the date of coming into force of the
scheme,
* + i _ l 6 ) Nf2)+S^f
D! a
1
Seecpp. 341-343.
379
GERMANY
(c) in respect of an insured person, whose age x > 25, who normally
was included in the initial insured population,
12>
9.5 Nf 12 ' + Sf
X +1
J
aa
or, in total, for the total number
16
of males and females, forming.the insured population on 1 January 1900,
19
ia
pf\
V¿i9oo —
— ^"V|
e
If
&
K l\Tai(12)
* '
aa
16
»raids)
20
I
+
oai02)\
Sai
'-'x
^ai(i2)
"
£•
&
i _u
T ' ^S ! * \
1/
K. M a i < 1 2 >
20
T^aias)
üi
aa
*-'21
U22
^ai(i2)
U23 •
x+1
oaia2)\
' 4--r
^X
+^ ^ • +3 ^ ^ +4 4 , ^ +
+^
I
+
^24
w
^,ai<i2)
5 2 ^
25
^3C
4 s regards the new entrants into insurance during a given year the
calculation depends on ¿£ <g,»i> which has been expressed above 1.
The present value of the cost of invalidity pensions applicable to these
persons is given by the result of the summation
18
/V°
"NT* cw
i(12;
ST> ¿(12)
.»)
where the numbers 3>tx = m3rix + 3tx represent, for the year concerned,
the number of male and female entrants, who are all assumed to enter
at ages 16, 17 or 18.
Old-Age Pensions in Course of Acquisition [16: p. 55].
The present value of old-age pensions in course of acquisition was
obtained directly, on the basis of a unit amount, by means of the formulae
69
f\va
— "SÎ /?
aaa
V1900
^ ^ *2>x w-x^x
16
for the insured population on 1 January 1900, and
18
16
for the new entrants into insurance in a given year.
1
See p. 343.
380
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Repayments
of
Contributions
The calculation of the present value of the repayments of contributions
in respect of (a) t h e insured population at 1 J a n u a r y 1900, and (b) the
new entrants into insurance during 1900 and the following years have
been seen above 1 .
AVERAGE P R E M I U M S AND ACTUARIAL B A L A N C E - S H E E T . — COMPARISON
O F V A R I O U S P R E M I U M S . — A N N U A L ESTIMATES
The actuarial balance-sheet as at 1 J a n u a r y 1900, which coincides with
the calculation of new average premiums, is based on a rate of interest
of 3 per cent.
On the liabilities side appear the following present values:
Present value of invalidity and old-age
pensions in force
Present value of
invalidity pensions in course
of acquisition .
In respect of the insured population
on 1 January 1900
In respect of future
entrants
Present value of
old-age
pensions in course
of acquisition .
In respect of the insured population
on 1 January 1900
In respect of future
entrants..
y
Qisoo
»3
1900
.... r
_^(
1.0315 [g . (¿v
1.0315
+ m • PQL]
i* fi
V*f
Vf
f^oa
S ' Viuoo
fi
vi
i—vf
g-Ql
Present value of repayments of contributions
1.038
Present value of administration expenses
and cost of medical aid . . . . . .
. n^r\t
~
0.0694. C^
1 ft
V*/i
+ i—vf
The method of calculation of these present values, with the exception
of t h e last, has j u s t been described. As regards t h e cost of administration and medical aid, this is based on t h e actual experience of the year
1897, for which t h e cost was equal t o 6.94 per cent, of the contribution
income. This proportion was assumed t o hold for each year from
1 J a n u a r y 1900 onwards, and hence the present value of the cost was
obtained b y applying the factor 0.0694 to the figure €LX appearing as the
first item on t h e assets side 2 .
As regards t h e calculations in respect Of new entrants into insurance
each year, for each benefit component the present value as at 1 J a n u a r y
1900 was considered:
(1)
in respect of entrants in t h e year 1900, i.e.
w* /» Q ;
1
2
See pp. 351-352.
See below.
381
GERMANY
(2) in respect of entrants in the year 1901, i.e.
and so on.
The sum of the results thus obtained, with the discount factor v, and
the annual coefficient of increase /, produces the present value of the
benefit component considered:
1 — Vf
V
The expression for the present value of invalidity pensions in course
of acquisition is multiplied by the factor 1.0315 in order to take into
account temporary invalidity pensions. For the numerical calculations
the values of g and m were taken to be
g == 101.94
m =
and
1.61
which were based on statistical returns for the period 1891-1895.
On the assets side appear
(1) the present value of contributions in respect of the insured
population on 1 January 1900:
16
and in respect of new entrants into insurance each year:
is
vi fi
"Kg ~.
7 2 i
^x
*• x j
1 — »/ M
or, in total,
\ir
i — v fi?
1
(2) the value of the accumulated funds.
The calculation of the average premiums is deduced directly from
the figures appearing under the various items of the actuarial balancesheet and produces the following results:
15.47 marks a year for the average premium 7t¡ in respect of the insured
population on 1 January 1900;
9.31 marks a year for the general average premium 7t9 in respect of
present and future contributors taken together.
In order to apportion the general average premium among the wage
classes the method of direct calculation was applied to one of the wage
classes and the premium applicable to each of the others was deduced
from this result on the assumption that the contributions in the various
classes should be in the same proportions as the benefits, that is to say,
in proportion to the numbers 1; 1.5; 2; 2.5; and 3.
382
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
Comparison of the Various Premiums
The actuarial memorandum of 1899 contained certain other observations of a particular interest with regard to the choice of the technical
structure of the financial organisation.
The system which had been in operation since the beginning was based
on the setting-up of capital values, and if this system were maintained
the annual premium would increase up to a maximum amount of 11.80
marks.
The fixed premium, in respect of an entrant into insurance at age 16,
required to cover the cost of his benefits, including State grants, was
calculated to be 11.11 marks 1. This premium which was " equitable "
for entrants at age 16 and, a fortiori, for all other entrants, would be
exceeded :
from 1922 onwards if receipts and expenditure were balanced annually 2
and
from 1930 onwards if, in accordance with the system then in force,
capital values were set up in respect of pensions awarded each
"" year.
Annual Estimates
With the aid of the data used in calculating the average premiums
the following estimated annual costs of the insurance scheme from
1900 onwards were calculated first in total and then per insured person.
TABLE X X X V I I . — ANNUAL ESTIMATE OF EXPENDITURE
ON THE SCHEME
Y
'
1900
•
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1920
1930
1940
1950
1960
1970
1980
2020
.
.
. . . .
.
Total
in million marks
Per insured person
in marks
62.8
68.8
74.4
79.7
84.8
89.7
94.4
' 98.9
103.2
107.3
111.2
114.9
118.4
138.7
155.5
167.0
174.0
177.1
178.0
178.3
4.96
5.43
5.88
6.30
6.70
7.09
7.46
7.81
8.15
8.48
8.78
9.08
9.35
10.96
12.28
13.19
13.74
13.99
14.06
14.09
178.4
14.10
1
To cover only expenditure charged to the institutions, excluding State
grants, the fixed premium for an entrant at age 16 was calculated to be
9.29
marks.
2
The premium which would have been necessary to establish this balance
year by year appears in the last column of table XXXVII.
383
GERMANY
The annual cost per insured person defined the contribution which
would have been necessary each year in order that receipts and
expenditure should balance.
From the figures in table XXXVII it was possible to check the result
obtained for the present value of the cost of the insurance scheme as
at 1 January 1900. Moreover an estimate was obtained of the total
funds which would have been accumulated at the time when the annual
cost attained its maximum of 14.10 marks per annum—on the hypothesis that a general average premium of 9.31 marks per annum was
immediately adopted and assuming that the State would pay 0.40 mark
per annum for each insured person on account of the assimilation of
periods of military service with contribution periods. On these assumptions the interest on the invested funds ought, at that time, to compensate for the difference 14.10—9.31—0.40 = 4.39 : at the rate of
3 per cent, the accumulated funds would then amount to 147 marks
multiplied by the number of insured persons.
§ 3. — General Average Premium as at 1 January 1910
[18: pp. 548-574]
As a preparation for the introduction of insurance benefits for
survivors, numerical values were obtained as at 1 January 1910, for
all the items which should appear in an actuarial balance-sheet, excluding,
however, the present value of contributions, since the rate of contributions had to be calculated. All the present values were calculated
with interest at the rate of 3 per cent, and in respect of the total number
of insured persons, that is to say, in respect of the insured population
as at the date of the balance-sheet and in respect of those who would
subsequently enter into insurance.
On the liabilities side appear:
Millions of marks
Present
acquired rights
resent value
vaiue of
oi ace
Present
resent value of 11 I n v a l i d i t y a n d o l d . a g e benefits
rights in course [ Survivors' benefits
of acquisition . J
Cost of medical aid
Administration expenses
Total
735
14,824
2,294
1,517
1,780
21,150
The figure in respect of survivors' benefits includes, as a safety
margin, an addition of 10 per cent, to the calculated figure.
In order to calculate the cost of medical aid and administration
expenses, the average annual costs per insured person were first obtained
from statistics collected from 1903 to 1907, viz. 1.1467 and 1.3449
respectively. The present values were obtained by multiplying these
two figures by the present value of unit contributions (see below).
On the assets side appear:
(1) the accumulated funds, the amount of which as at 31 December
1909 was obtained by linear extrapolation from the known
amounts as at 31 December 1905, 1906 and 1907, viz. 1,577
million marks;
384
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
(2) the product of the present value of unit contributions calculated
by the general average premium ng, or, taking into account the loss
of contributions during military service, 1.323 ng million marks.
Equating assets and liabilities produces a linear equation the solution
of which gives to Tzg the value of 14.79.
RATE OF CONTRIBUTION IN EACH WAGE CLASS
Statistics collected from 1903 to 1907 produced an average number
of weekly contributions per annum of 48.26 and an average amount
of weekly contribution equal to 0.24631, or an average annual contribution of 0.24631 x 48.26 = 11.89.
The ratio of the calculated general average premium izg to this
14.79
average annual contribution, viz. . .\Q = 1-24, gave the factor by
which the contributions then in force in each class had to be multiplied.
The figures thus obtained were rounded off to the even integer below,
for the first two classes, and the even integer above for the others.
The rates of contribution finally adopted corresponded to an average
annual premium of 14.86 marks.
STATE CHARGE
The annual charge falling on the State under the heading of survivors'
insurance was estimated for a period of ten. years. The premium
corresponding to the total charge falling on the State—for all classes
of benefit—was calculated with the aid of the present values used in
calculating the average premium, and, taking into account the safety
margin of 10 per cent, added in respect of survivors' benefits, an annual
premium of 6.531 marks was obtained.
§ 4. — Actuarial Balance-Sheet as at 1 January 1914
[19: pp. 73-80]
IN RESPECT OF THE INSURED POPULATION ON 1 JANUARY
1914
The assets and liabilities were first calculated in respect of the insured
population on 1 January 1914, with a rate of interest of 3.5 per cent.
ASSETS
Accumulated funds
Present value of future contributions .
Deficiency
LIABILITIES
Million
marks
2,105.5
3,915.4
4,907.5
10,928.4
Million
marks
Present value of pensions in
course of payment . . . .
Present value of benefits in
course of acquisition . . .
Present value of cost of medical aid
Present value of administra-
972.5
9,236.8
388.7
330.4
10,928.4
385
GERMANY
The figure representing the value of the accumulated funds was
obtained by taking the cost price for stocks and shares and the book
value for real property.
The present value of pensions in course of payment and also that
of benefits in course of acquisition is the sum of the results obtained
for each class of pension: invalidity, old-age, widows' and orphans';
for benefits in course of acquisition separate consideration was given
to basic sums and increments. As regards medical aid and administration expenses, it was assumed that the annual expenditure would
represent a constant 10 per cent, and 8.5 per cent, of the contribution
income *.
IN RESPECT OF THE ANNUAL CROP OF NEW ENTRANTS
An actuarial balance-sheet was then constructed limited to the
persons who entered into insurance each year, who were assumed to
have a constant age distribution, as shown by the coefficients3 deduced
from statistics compiled on the basis of contribution cards .
With interest at 3.5 per cent., this balance-sheet was constructed
as follows for each sex separately:
ASSETS
LIABILITIES
Million marks
Present value of future
contributions . . .
Deficiency
Males Females
130.0
268.7
63.6
118.5
332.3
248.5
Million marks
Present value of:
Invalidity pensions .
Old-age pensions to
age 70
Widows' pensions
and allowances .
Orphans' pensions .
Orphans' allowances
Cost of medical aid .
Administration
expenses
. . . .
Males Females
240.8
222.9
1.6
23.9
9.7
1.4
26.9
13.0
22.8
11.0
332.3
248.5
IN RESPECT OF THE TOTAL ANNUAL NUMBER OF EXITS
Account was taken of persons who left the field of insurance for
causes other than 8death or invalidity, by reference to figures calculated
for the year 1914 . Considering each sex separately and maintaining
the rate of interest at 3.5 per cent., a third actuarial balance-sheet,
reproduced below, was constructed in respect of the group of persons
who were expected to cease to be insured each year.
1
2
3
See p p . 364-365.
See p p . 319-321.
See p p . 321-322.
25
386
ACTUARIAL TECHNIQUE AND FÍNANCIALORGANISATION
ASSETS
LIABILITIES
Million marks
Present value of future
contributions . . .
Deficiency
Million maris
Males Females
79.2
130.0
135.0
124.4
265.0
Present valué of:
Invalidity pensions .
Old-age pensions to
age 70
Widows' pensions
and allowances .
Orphans' pensions .
Orphans' allowances
Cost of medical aid .
Administration
expenses
. . . .
203.1
FINANCIAL
Males Females
206.0
187.5
6.2
1.5
20.8
7.0
1.0
13.0
7.9
11.0
6.7
265.0
203.6
EQUILIBRIUM
The comparison of these three balance-sheets led to the following
conclusions:
As regards males, new entrants each year will bring with them a
deficiency of 63.6 millions, while exits will extinguish a deficiency of
135.0 millions. The combined result of these two movements, then,
will be to increase the assets as compared with the liabilities by 71.4 millions. Similarly, as regards females, each year the assets will be increased as compared with the liabilities by
124.4 — 118.5 = 5.9 millions.
If it be assumed that the' annual coefficient of increase / applies equally
to entrants as to exits, the improvement in the assets as compared with
the liabilities resulting from the double movement of entry and exit
in all future years is given in millions by the formula?
71.4 (v* /* + v* / 2 +
) = 71.4 ? „
for males and
5.9 (»* /* + v* / 2 +
) = 5.9 yf
for females.
On the basis of an annual coefficient of increase / equal to 1.02 for
males and 1.01 i for females, and taking interest at 3.5 per cent., there
is obtained <pm = 68.498 in the case of males and <pf = 48.783 in the
case of females. The improvement in the assets is, then, in total
68.498 x 71.4 + 48.783 x 5.9 = 5,178.6 million marks.
This figure exceeds by 271.1 millions the deficiency disclosed if only
the insured population at the date of the balance-sheet is considered,
and from this fact the financial equilibrium of the scheme was inferred.
GERÜANY
387
§ 5 . — Financial Organisation of the Insurance institutions
Hitherto the financial system of the insurance scheme has been
considered as a whole; it remains to examine the financial working of
the various insurance institutions and, in particular, to bring out the
principle underlying thè mechanism which was introduced on 1 January
1900, in order to apportion ámongthem the cost of benefit payments.
It should first be recalled that when the 1889 Act came into operation
öh institution for insurance against invalidity, old age and death was
Created in each of the large territorial divisions of the Federation.
Besides these 31 territorial institutions there were 9 special pension
funds which were functioning before the operation of the new Act;
five of them for the staff of the railways and the other four for that of
the mines. The 1889 Act also instituted a special seamen's fund.
Under the provisions of the 1889 Act each institution was financially
autonomous 1. During the first decennial period of operation uniform
rates of contribution were imposed on all institutions. Subsequently
each One of them had to fix the rate of contributions for itself, taking into
account the surpluses or deficiencies disclosed in preceding periods,
subject to the approval of the Insurance Office.
Each institution set up a reserve fund, the amount of which, at the
end of the first decennial period, must not be less than a minimum calculated in advance, on thé basis of the total pensions to be paid by the
institution during the said period, nor must it be greater than twice
this minimum amount. So long as the minimum was not attained no
©all could be made either on the principal or on the interest of the reserve
fund without the consent of the Reich Insurance Office.
In the first years of operation of the scheme great difficulties were
revealed in the financial position of certain institutions. Although the
majority of the institutions showed surpluses—and even, in thé case of
industrial districts, for example Berlin, important surpluses—certain
institutions in agricultural districts, for example East Prussia, were in
deficiency. It appeared from a detailed examination of the institutions'
balance-sheets that thè results were not due to bad administration or
to insufficient control, but were mainly due either to a too large proportion of insured persons belonging to the lower wage classes or, more
generally, to an unfavourable age distribution. It was even anticipated
that the deficiencies would not be gradually extinguished but on the
contrary would continue to grow. It was to remedy this state of affairs
that the 1899 Act introduced provisions apportioning the cost of benefits
among the various institutions.
Under the provisions of the 1899 Act, the rates of contribution fixed
by the Act for a decennial period were applied to all institutions. Thenceforward institutions could ho longer build tip separate reserve funds.
The credits which were accumulated in the reserve fund of each institution as at 1 January 1900 were incorporated in its resources. For the
purpose of establishing compensation, the cost of benefit payments was
1
If an insured person who had belonged in turn to several institutions
received a benefit, the cost of this was apportioned between these institutions
through the medium of the Insurance Office.
388
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
apportioned1 among the various institutions by means of the following
mechanism .
•
Each insurance institution retained the management of its fund, but
this was divided into a " common fund " and a " private fund ": one
part of the cost of pensions (common cost) was charged conjointly to
the common funds of all the institutions, while the other part (private
cost) was charged to its private fund. The common cost was composed
principally of three-quarters of the total amount of the old-age pensions
charged to the insurance scheme, the basic portions of invalidity pensions, and the increments in invalidity pensions due to weeks of sickness.
The private cost consisted of one quarter of the total amount of the
old-age pensions charged to the insurance scheme, the increments in.
invalidity pensions due to contributions actually paid, the sums allocated
to repayments of contributions, the cost of medical aid and administration expenses.
As from 1 January 1900, the common fund of each institution was
maintained by four-tenths of the contributions received by the institution and by the addition of interest at the rate of 3 per cent, per annum.
The private fund received as an initial endowment the funds as at.
1 January 1900,.and thereafter six-tenths of the contributions received
after that date.
The common cost was apportioned annually among the various
insurance institutions in proportion to the assets of their common funds
as at 31 December of the previous year.
The apportionment transactions gave rise to a system of accounts
which was in the charge of the Calculation Bureau 2 of the Insurance
Office, which finally determined the sums to be repaid to the Post Office
in respect of benefit payments, by the Reich Government, by the
private fund of each institution and by the common funds of the various
jnstitutions respectively. In applying the principles of apportionment
described above, account was taken of. the payments made by the
Reich Government in respect of weeks deemed to be contribution
weeks, and, moreover, when the pensioner had contributed to several
institutions the private cost was divided among them in proportion to
the amounts received by each.
The 1911 Act maintained the principle underlying the mechanism for
the apportionment of expenditure introduced by the 1899 Act, but. it
extended the common cost and correspondingly restricted the private
cost.
As from 1 January 1912, common cost included:
the basic amounts of invalidity pensions and the children's bonuses;
the amount charged to the insurance scheme of the old-age pensions;
the amount charged to the insurance scheme of the widows', widowers'
and orphans' pensions and allowances;
increments due to weeks of military service or sicknessl
The other items of expenditure of the insurance scheme constituted
the private cost.
""" '
1
At the same time the amount of the Federal subsidy was fixed, but consideration is given here only to the essential mechanism which was devised
for2 the purpose of apportioning the expenditure charged to thé insurance scheme.
See p. 395.
389
GERMANY
The proportion of contributions which is paid to the common fund
was increased from four to five-tenths.
In addition, institutions were permitted to arrange reinsurance
contracts among themselves for the whole or part of their charges.
§ 6. — Experience
The total financial results appear in table XXXVIII, which also shows
the progressive growth of the accumulated funds.
TABLE X X X V I I I .
FINANCIAL R E S U L T S FROM T H E I N A U G U R A T I O N
O F THE SCHEME U N T I L 1 9 1 3
(in thousands of marks)
Expenditure
Receipts
Year
1
1891 .
1892.
1893.
1894 .
1895.
1896 .
1897 .
1898 .
1899 .
1900 .
1901 .
1902 .
1903.
1904 .
1905 .
1906.
1907 .
1908 .
1909.
1910 .
1911 .
1912 .
1913 .
Contributions
Interest
and
Federal miscellgrants aneous
receipts
Total
Miscellaneous
expenditure,
Benefits
(including adminiscost of
tration
medical expenses,
aid)
losses on
sale of
securities,
etc.
Total
Accumulated
funds on
31 De' cember
2
3
4
5
6
7
8
9
93,972
95,643
96,909
100,036
102,721
109,136
112,812
117,952
127,263
128,770
134,814
138,986
146,277
154,088
161,292
170,126
178,643
184,422
188,438
197,354
209,806
273,375
289,917
6,050
9,041
11,337
13,923
16,933
19,232
21,837
24,401
27,108
30,762
33,871
37,850
41,855
45,276
47,351
48,758
49,621
50,522
51,501
52,538
53,283
55,069
58,526
796
3,910
6.771
10,143
13,404
15,857
18,392
21,211
24,001
27,538
30,841
33,842
36,591
39,137
41,669
44,457
47,528
50,938
53,955
57,100
60,349
71,449
70,902
100,818
108,594
115,016
124,102
133,058
144,225
153,042
163,564
178,373
187,070
199,525
210,677
224,722
238,501
250,312
263,341
275,792
285,882
293,894
306,992
323,438
399,893
419,345
15,300
22,396
28,021
34,816
42,681
51,322
59,894
68,940
78,657
92,729
105,271
120,414
135.153
148,356
158,220
166,039
172,891
181,477
189,029
196,825
203,866
205,192
218,332
3,899
4.836
5,044
5,388
6,063
6,764
7,232
7,911
8,966
11,244
10,851
11,948
12,765
14,020
14,957
16,316
17,359
18,862
20,365
22,120
22,368
24,967
24,617
19,199
• 27,232
33,065
40,204
48,744
58,086
67,126
76,852
87,623
103,973
116,122
132,362
147,918
162,376
173,177
182,355
190,250
200,339
209,394
218,945
226,234
230,159
242,949
81,619
162,981
244,932
328,831
413,145
499,284
585,200
671,912
762,662
845,759
929,162
1,007,478
1,084,281
1,160,405
1,237,540
1,318,526
1,404,068
1,489,611
1,574,111
1,662,159
1,759,362
1,929,095
2,105,492
390
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
I n column 4 of this table under the heading f< Interest and miscellaneous receipts " a p p e a r : (1) rents of properties used in administering the
scheme, which are not true receipts but represent only book-keeping
items; (2) profits realised on t h e sale of securities.
The cost of medical aid and administration expenses, which were
reproduced separately in the preceding chapter 1, are incorporated in the
figures in columns 6 and 7 of the above table respectively; in column 7
among t h e miscellaneous expenses appear losses on sale of securities.
TABLE O F SYMBOLS INTRODUCED IN CHAPTER III
~i
= Average premium applicable to the initial insured population.
/
= Average premium applicable to the group of new entrants
into insurance each year.
u
= General average premium applicable to all insured persons, present and future.
&
x
= Number of insured males and females aged a; at a given
date.
* = 2 **
Total number of insured males and females at a given
date.
91,
Number of insured males and females who enter into
insurance during a year.
cy
dl
7f
¿>™
ti
= Total amount of repayments of contributions, of all kinds
during the ith year of operation of the scheme.
= Total amount of repayments of contributions of all kinds
during a year in the normal period.
= Capital value of invalidity and old-age pensions awarded
during a year of the normal period to insured males
and females.
ij
= Average present value of invalidity pensions in force on
71
1 J a n u a r y 1900, which were awarded - years previously.
¡V-
,
1900-i-i
Q'i
= Present value of invalidity pensions in payment on
l
*w
Q"i
l8
»°
1
= N u m b e r of invalidity pensions in force on 1 J a n u a r y 1900,
l
which were awarded during the year 19PQ-J--.
1 J a n u a r y 1900.
= Present value of old-age pensions in payment on 1 J a n uary 1900.
See table X X X V I .
GERMANY
io
Q1900
p
Oia
Visoo
Oc"
Qtx»
1900
Qtx*
c
Y
*
391
= Present value of a unit invalidity pension in course of
acquisition, calculated in respect of the insured population as at 1 January 1900.
=
Present value of the right to an invalidity pension increment which increases by one unit for each contribution
year, calculated in respect of the insured population as
at 1 January 1900.
= Present value of invalidity pensions in course of acquisition
calculated in respect of the group of new entrants into
insurance in the year.
= Present value of old-age pensions in course of acquisition,
calculated in respect of the insured population as at
1 January 1900.
= P r e s e n t value of old-age pensions in course of acquisition,
-
calculated in respect of the group of new entrants into
insurance in the year.
= Present value of the contributions expected from an
insured person aged x, on the basis of an annual payment equal to a unit.
CHAPTER IV
FINANCIAL ADMINISTRATION
§ 1. — Investment of Funds. — Statutory Provisions
and Regulations
Each institution itself invests the funds which it has put to reserve,
in accordance with the statutory provisions and regulations and under
the control of the Insurance Office.
The 1889 Act merely stipulated that the insurance funds should be
invested in accordance with the rules which were applied to the investment of the workmen's compensation insurance funds. The latter
could be either entrusted to a public savings bank or invested in
accordance with the provisions in each of the Federated States relating
to trust funds. In States where there were no such provisions, funds
could be invested (1) in loans issued or guaranteed by the Reich
or by a State; (2) in loans issued by communes, associations of communes or provinces; (3) in loans issued by credit institutions of one
or other of these bodies, provided that the loan could be called in by
the creditor or that provision was made for its regular amortisation.
Funds could also be placed at interest with the Reichsbank. Insurance
institutions could be empowered by an association of communes or by
a Federated State, to invest, subject to revocation, part of their accumulated funds, not exceeding one quarter, in other remunerative investments
than those prescribed by the Act or in real estate.
The 1899 Act authorised the investment of insurance funds under
the conditions laid down in the Civil Code for investing trust funds,
or in accordance with the rules governing the investment of trust funds
in force in the Federated State in which the institution operated. The
various types of investment so prescribed correspond closely with those
enumerated under (1), (2), (3), (4), (8) and (9), in the second part of
this survey 1 .
Further, the institution could be authorised:
by the Federated State in which it operates, to make loans to
communes and to associations of communes;
by the Insurance Office, up to a maximum of half its accumulated
funds, for the purpose of avoiding loss of capital or for the purpose
of helping undertakings intended mainly or exclusively for the benefit,
of insured persons, to make other investments than those prescribed
for the investment of trust funds and in particular to acquire real
estate; however, as soon as.the total of these investments exceeded a
quarter of the funds the institution had also to obtain the consent of
the association of communes or of the Federated State, as the case
might be.
1
Chapter IV, § l,.see below, pp. 434-435.
393
GERMANY
The Federated State could enact regulations limiting the total amount
which institutions were allowed to allocate to this or that category of
investments.
The 1911 Act reproduced to a large extent the provisions of the
1899 Act. The consent of the Insurance Office became necessary in
all cases, whether it was a question of authorising the various types
of investment or of limiting the total amount which could bs allocated
to a particular category. The Act itself authorised the purchase of
bearer bonds of joint-stock mortgage banks, when they were entered
as first class in the list drawn up by the Reichsbank. It further
stipulated that at least a quarter of the total funds must be invested
in bonds of the Reich or of the Federated States.
2. — Statistics of Investments
COMPOSITION OF THE ACCUMULATEÜ FUNDS
The apportionment of the accumulated funds among the main classes
of investment, for the regional institutions alone up to 1899, and for
the whole of the insurance scheme as from 1900, is given in absolute
figures and in percentages in table XXXIX.
A proportion of the accumulated funds has been employed in " social"
investments, that is to say in financing enterprises or undertakings of
benefit to insured persons or even to the whole of the general public.
These, investments had as their object:
(1) the building of working-class houses; in respect of a total amount
which increased from 12 millions in 1896 to 483 millions in 1913;
(2) the granting of rural credits : in respect of a total amount which
increased from 13 millions in 1896 to 120 millions in 1913;
(3) the building of hospitals, curative institutions, public health
and other establishments for public utility purposes: in respect
of a total amount which increased from 6 millions in 1896 to
562 millions in 1913;
(4) the building by the Regional Insurance Offices of hospitals,
sanatoria, convalescent homes and homes for the aged; in
respect of a total amount which increased from 12 millions in
1900 to 80 millions in 1913.
The proportion of social investments in the total invested funds
reached the following figures each year:
Year
Percentage
1896
1897
1898
1899
1900
1901
1902
1903 . . . . . . .
1904 . . . . . . .
6.7
8.9
13.8
19.0
23.5
30.0
32.0
33.8
35.9
Year
1905
1906
1907
1908
1909
1910
1911
1912
1913 . . . . . . :
Percentage
38.3
40.9
44.6
43.2
45.8
48.9
50.1
49.6
50.6
394
A C T U A R I A L T E C H N I Q U E AND F I N A N C I A L ORGANISATION
TABLE
XXXIX.
D I S T R I B U T I O N - O F TOTAL INVESTMENTS
Securities
Year
Loans
State
F u n d s or
Railway Funds
Empire F u n d s of ComFunds g u a r a n - munes
teed
by t h e
State
To
Communes
On
mortgages
3
5
6
4
Cash
in
hand
Furniture
and
Fittings
8
9
10
1,976
5,266
7,667
8,588
9,224
9,436
10,577
11,234
14,802
22,287
31,394
38,331
44,067
49,424
55,083
61,098
68,573
76,736
81,937
85,014
89,083
92,306
96,676
1,044
4,562
5,618
9,280
8,169
7,115
5,495
6,895
12,948
13,593
13,851
13,186
15,393
20,563
26,291
24,080
21,189
21,270
23,195
27,931
30,565
40,623
30,729
26
34
38
41
43
44
46
49
51
52
51
51
Í8
46
16
15
13
14
18
21
18
15
14
15
17
17
21
15
To
Real
Savings E s t a t e
Banks
7
(in thousand marks)
5,364
13,562
21,920
25,276
26,033
24,841
25,484
24,935
25,128
28,964
32,284
32,015
34.132
34,253
35,627
36,222
34,504
36,223
37,701
41,669
52,219
66,584
76,564
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
21,788
35,163
47,433
54,788
64,060
70,938
73,298
71,799
76,977
109,313
111,059
119,806
126,283
130,525
134,121
137,311
138,758
143,891
148,452
156,729
174,178
224,865
285,608
28,532
14,489
3,166
49,446
37,426
5,833
71,328
60,370
12,100
99,080
83,606
22,642
129,022 102,369
41,678
167,361 118,862
61,037
197,716 146,104
79,180
216.507 185,854
99,667
231,298 218,619 120,310
279,678 237,700 151,982
298,060 264,348 175,125
316,165 288,475 195,665
335,608 306,316 217,700
354,198 326,143 239,914
366,946 351,284 262,096
379,226 385,908 287,313
383,599 435,440 313,709
384,159 473,338 344,063
383,718 505,238 382,460
382,211 540.298 416,083
380,843 564,154 455,045
380,389 603,917 499,140
381,911 650,833 559,963
107
107
151
311
231
151
168
151
' 221
2,243
3,042
3,833
4,781
5,385
6,090
7,366
8,293
9,931
H.4Ì1
12,223
13,275
14,472
15,804
—
—
—
—
—.
—
—
—
—
—
—
—
—
—
-—
——
—
—
•
—
7,006
7,609
Proportions
(per thousand)
1900 .
1901 .
1902 .
1903 .
1904 .
1905 .
1906 .
1907 .
1S08 .
1909 .
1910 .
1911 .
1912 .
1913 .
34
35
32
31
29
29
27
25
24
24
25
30
34
36
129
120
119
116
112
108
104
99
97
94
94
99
117
136
331
321
314
310
305
297
288
273
258
244
230
216
197
181
281
284
286
283
281
284
293
310
318
321
325
321
313
309
180
188
.194
201
207
212
218
223
231
243
250
259
259
266
3
3
4
4
5
5
6
6
7
7
8
7
7
7
—
—
—
—
—
—
—
—
—.
—
4
•
—
4
INTEREST YIELD
The rate of interest yielded by securities on the basis of the purchase
price, was calculated to be as follows, in respect of regional institutions
395
GERMANY
only up to 1899, and in respect of the whole of the insurance scheme
from 1900 onwards:
Year
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
§3.
Percentage
3.67
3.67
3.66
3.65
3.58
3.53
3.49
3.49
3.50
3.53
3.56
3.55
Year
"
Percentage
1903
1904
1905
1906
190.7
1908
1909
1910
1911
1912 . . . . : . .
1913
Actuarial and Financial Control.
3.54
3.54
3.53
3.53
3.55
3.57
3.57
3.57
3.59
3.61
3.65
Statistics
ACTUARIAL AND FINANCIAL CONTROL
From the very beginning insurance institutions were subjected to
the supervision of a central body, the Reich Insurance Office, which
could at any time examine their financial administration. All the
information relating to the administration of the scheme and all the
accounts had to be furnished to that Office in accordance with its
instructions and within the time limits which it had itself prescribed.
It laid down the rules which the institutions had to follow in compiling
their accounts.
The 1889 Act formed within the Insurance Office a Calculation
Bureau which had the following particular duties:
(1) to apportion the cost of benefits between the Reich and the
various institutions;
(2) to help in statistical investigations.
These provisions have not been amended in any essential particulars
by subsequent Acts. The 1899 Act specified that a copy of the draft
budget should be submitted to the Insurance Office and that the latter
should formulate its objections if the draft was not in conformity
with the legal or statutory regulations (" or if the draft was likely to
imperil the solvency of the institution ", added the 1911 Act.)
It has been seen above that the rates of contribution were fixed by
law for decennial periods: it followed that at the expiration of each of
these periods the average premiums had to be revised and consequently
that an actuarial balance-sheet had to be constructed at least once in
ten years.
STATISTICS
The Insurance Office collected the returns of the various institutions
and with the help of its Calculation Bureau analysed them for the
purpose of compiling each year statistics relating to the whole of the
insurance scheme and publishing them in its monthly review [22].
396
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
BIBLIOGRAPHY
I. — Legislative Texts
1. " Gesetz betreffend die Invaliditäts- und Altersversicherung, vom 22. Juni
1899 ". Reichsgesetzblatt 1899, S. 97.
2. " Invalidenversicherungsgesetz vom 13. Juli 1899 ". Reichsgesetzblatt 1899,
S. 393.
3. " Die Reichsversicherungsordnung vom 19. Juli 1911 ". Reichsgesetzblatt
1911, S. 509.
II.—Reichstag Documents
7. Legislaturperiode, IV. Session 1888/89
4.- Entwurf eines Gesetzes betreffend die Alters- und Invaliditätsversicherung
(S. 1-19).
5. Begründung (S. 19-71).
6. Denkschrift über die Höhe der finanziellen Belastung, welche durch den
Gesetzentwurf betreffend die Alters- und Invaliditätsversicherung voraussichtlich hervorgerufen werden wird (S. 72-94).
7. Mathematische Anlage zu der Denkschrift betreffend die aus der Alters- und
Invaliditätsversicherung zu erwartende finanzielle Belastung (S. 95-126).
8. Denkschrift über die Höhe der wöchentlichen Beiträge, welche infolge der
Kommissionsbeschlüsse erster Lesung für jeden Versicherten zu entrichten
sind (S. 292-320). ,
9. Finanzielle Folgerungen aus den Kommissionsbeschlüssen zweiter Lesung
(S. 321-330).
10. Denkschrift über die Höhe der wöchentlichen Beiträge, welche im Beharrungszustande nach den Reichstagsbeschlüssen zweiter Lesung im Durchschnitt
für das Reich in jeder Lohnklasse voraussichtlich zu erheben sind (15 S.).
8. Legislaturperiode, IV. Session 1895/97
11. Entwurf eines Invalidenversicherungsgesetzes (55 S.).
12. Begründung (59 S.).
13. Denkschrift betreffend die finanzielle Entwicklung der Invaliditäts- und
Altersversicherungsanstalten und der zugelassenen besonderen Kasseneinrichtungen (92 S.).
10. Legislaturperiode, I. Session 1898/99
14. Entwurf eines Invalidenversicherungsgesetzes (S. 1-162).
15. Begründung (S. 163-370).
16. Denkschrift betreffend die Höhe und Verteilung der finanziellen Belastung
aus der Invalidenversicherung (135 S.).
12. Legislaturperiode, IL Session 1909/10
17. Entwurf einer Reichsversicherungsordnung (299 S.).
18. Anlagen zum Entwurf einer Reichsversicherungsordnung (784 S.).
13. Legislaturperiode, IL Session 1914/15
19. Denkschrift über die Vermögenslage der Invaliden- und Hinterbliebenenversicherungsträger am 1. Januar 1914 (82 S.).
GERMANY
397
III. — Administrative Documents
20. Amtliche Nachrichten des Reichsversicherungsamts, 1901. 2. Beiheft.
21. Amtliche Nachrichten des Reichsversicherungsamts, 1906. 1. Beiheft. (Das
Ausscheiden der Invalidenrentenempfänger der Jahre 1891 bis 1899
aus dem Rentengenuss).
22. " Finanzieller und statistischer Jahresbericht ". Amtliche Nachrichten des
Reichsversicherungsamts.
IV. — Studies
23. L. WEBER: "Etude sur les tables de mortalité d'invalides et sur les tables
d'invalidité au point de vue des calculs d'assurance ". Institut des
actuaires français. Bulletin trimestriel, No. 30, October 1897, pp. 144-201.
24. M. BELLOM : Les lois d'assurance ouvrière à l'étranger. Tome 3 (1) : " Assurance contre l'invalidité ". Paris, 1905.
25. Recueil de documents sur la prévoyance sociale réunis par le Ministère du
Commerce: " L'assurance obligatoire contre l'invalidité en Allemagne ".
Berger-Levrault & C le , Paris, 1905.
26. M. CASTELLANI: Sulla frequenza della invalidità. Cassa nazionale per le
assicurazioni sociali. Rome, 1925.
27. E. WITTE and M. SAKMANN: Financial History of the Workers' Invalidity,
Old-Age and Survivors' Insurance of Germany. Social Security in America
Social Security Board. Washington, 1937.
PART
II
1924 ONWARDS
INTRODUCTION
The position of invalidity, old-age and widows' and orphans' insurance
for workers 1 was, in 1924, very different from that which might have been
expected, judging from the valuation balance-sheet as at 1 January 1914.
As a result of the war and the depreciation of the mark the accumulated
funds had almost entirely disappeared; their total at the end of 1924
was only 329.6 million RM., as compared with 2,105.5 million marks
at the end of 1913. Taking into account the growth of reserves which
should normally have taken place between 1913 and 1924, the workers'
insurance assets may be estimated to have suffered a loss of about
4,000 million marks.
At the end of the period of inflation, when once again attention was
directed to the financial equilibrium of the insurance scheme, it was
decided to abandon the accumulation system based on average premiums,
on which the financial organisation had hitherto rested, and to adopt the
assessment system. It will be seen that the rates of contribution were
no longer dependent on the calculation of average premiums and that
no attempt was made to build up-again the actuarial reserves.
It is not the object of the following study to set forth in their
chronological order the numerous legislative amendments made since
1924. A detailed analysis will first be made of two tables of annual
estimates which were constructed for a quinquennial and for a decennial
period respectively. The estimates in these tables were in fact exceeded,
in the first place by reason of increases in and extensions to the benefit
payments and secondly as a result of the economic crisis. In 1930 the
position proved to be critical and it continued to become more and more
dangerous with the increase in unemployment and the reduction in hours
of labour entailing lower wages. Accordingly steps had to be taken
through the Emergency Decrees to make a considerable reduction in the
level of most benefits. These restrictive measures were not sufficient for
the purpose and an effort was made through the Act of 7 December 1933
to secure the solvency of the workers' insurance scheme at the same time
as that of the salaried employees' and miners' insurance schemes. The
technical memorandum attached to the text of this Act sets forth, by
means of three actuarial balance-sheets based on different assumptions,
the estimated financial position and future progress of the workers'
insurance scheme. The 1933 Act stipulates that " the value of future
contributions and other assets—including Reich grants—must adequately
1
Hereinafter called " workers' insurance scheme ".
400
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
cover all future expenditure ". The explanatory statement makes it
clear that it is intended to organise the finances of the scheme on the
basis of an accumulation system with average premiums, that is to say, to
return to the pre-1914 system. However, the increase of the resources
by the amount required to permit this change was deferred until such
time as the expenditure on unemployment insurance had decreased by
a similar amount. The object of the Act of 21 December 1937 was to
transfer to the workers' insurance scheme part of the unemployment
insurance income released by the almost total disappearance of unemployment and also to charge the Reich Government- with the cost of the
uncovered liabilities. In this way the 1937 Act made it possible to
establish the finances of the workers' insurance scheme on the basis of
an accumulation system with average premiums.
CHAPTER I
DEMOGRAPHIC ESTIMATES, BASES AND EXPERIENCE
§ 1. — Biometrie Tables
INVALIDITY RATES
1
Investigations Preparatory to the 1933 Reform [20]
The probability of becoming invalid was deduced from data obtained
from the workers' insurance scheme during the period 1925-1930, which
gave for quinquennial age groups from age 20 to 65 the ratio of the
number of persons becoming invalid to the total number of insured
persons.
The results are given in table I for each sex separately and also for both
sexes combined.
TABLE I. — PROBABILITY OF BECOMING INVALID
Age group
(years)
20-25
25-30
30-35
35-40
40-45
45-50
50-55
55-60
60-65
Males
Females
All insured
persons
0.00099
0.00315
0.00537
0.00581
0.00738
0.00997
0.01757
0.03472
0.08670
0.00122
0.00407
0.00650
0.00783
0.01340
0.01824
0.03624
0.06636
0.14168
0.00050
0.00321
0.00547
0.00610
0.00867
0.01189
0.02168
0.04268
0.10325
RATES OF CESSATION OF INVALIDITY AND OLD-AGE PENSIONS
Investigations Preparatory to the 1933 Reform
The rates of cessation of invalidity and old-age pensions for all
insured persons, irrespective of sex, were obtained from the experience
of the workers' insurance scheme itself during the period 1924-1927 2.
They appear in a double-entry table according to age and duration of
1
Invalidity has the same definition as in the pre-1914 scheme (see Part I,
p p . 331-332).
2
Amtliche Nachrichten
für Reichsversicherung,
1931, No. 10, p . 456.
26
402
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
TAHLE I I . —
RATES OF CESSATION OF I N V A L I D I T Y
(both sexes together)
Select cessation rates when the following number
of years has elapsed since grant of pension
Age at
becoming
invalid
0
2
1
4
3
5
6
7
8
Ultim-
9
10
Age
ate attained
cessation
after
11
rates
years
33
22 • 0.2609 0.3013 0.2196 0.1760 0.1318 0.0965 0.0745 0.0590 0.0475 0.0395 0.0340 0.0320
23
322
34
24
324
35
25
326
36
26
328
37
27
0.2100 0.2100 0.1553 0.1294 0.1050 0.0840 0.0670 0.0551 0.0465 0.0390 0.0350
330
38
28
332
39
29
334
40
30
336
41
31
338
42
32
0.1590 0.1550 0.1189 0.0920 0.0765 0.0641 0.0560 0.0481 0.0420 0.0373 0.0350
340
43
33
343
44
34
346
45
35
349
46
36
352
47
37
0.1416 0.1400 0.1067 0.0865 0.0725 0.0620 0.0515 0.0440 0.0390 0.0370 0.0360
355
48
38
358
49
39
361
50
40
364
51
41
367
52
42
0.1386 0.1300 0.1024 0.0840 0.0701 0.0594 0.0510 0.0470 0.0430 0.0395 0.0375
370
53
1
43
373
54
44
376
55
45
379
56
46
382
57
58 •
47
0.1291 0.1170 0.0915 0.0735 0.0646 0.0565 0.0505 0.0463 0.0428 0.0405 0.0382
385
48
388
59
49
391
60
50
394
61
51
397
62
52
0.1095 0.0962 0.0776 0.0651 0.0580 0.0515 0.0473 0.0440 0.0410 0.0394 0.0397
400
63
53
405
64
54
412
65
55
422
66
56
440
67
57
0.0817 .0.0754 0.0607 0.O507 0.0463 0.0442 0.0425 0.0405 0.0412 0.0422 0.0440
470
68
58
510
69
59
547
70
60
605
71
61
660 • 72
62
0.0592 0.0582 0.0499 0.0469 0.0442 0.0440 0.0470 0.0510 0.0547 0.0605 0,0660
727
73
63
806
74
64
890
75
65
972
76
66
1056
77
67
0.O259 0.0470 0.0510 0.0547 0.0605 0.0660 0.0727 0.0806 0.0890 0.0972 0.1056
1154
78
68
1264
79
69
1371
80
70
1478
81
71
1602
82
72
0.O373 0.0727 0.0806 0.0890 0.0972 0.1056 0.1154 0.1264 0.1371 0.1478 0.1602
1746
83
73
1896
84
74
2042
85
75
2183
86
76
2319
87
77
0.0528 0.1154 0.1264 0.1371 0.1478 0.1602 0.1746 0.1896 0.2042 0.2183 0.2319
2443
88
78
2545
89
79
2739
90
80
2881
91
81
3024
92
82
0.O801 0.1746 0.1896 0.2042 0.2183 0.2319 0.2443 0.2545 0.2739 0.2881 0.30,24 3168
93
83
3313
94
84
3458
95
85
3604
96
86
3750
97
87
3897
98
88
4044
99
89
4191
100
.
•
•
_
'
403
GERMANY
invalidity for the first ten years of invalidity and in an ultimate table
for durations of ten years and over. Both tables follow fairly closely
the classic tables of 1906 1 . 2The ultimate table is run into the general
mortality table of 1924-1926 from age 65.
AWARD
OF W I D O W ' S
PENSIONS
Investigations Preparatory to the 1933 Reform
The probability that on the death of a healthy insured person or an
invalid pensioner a pension will be payable to his widow is obtained
from the formula
W
*
=
A
a
,
T
i
K qx + ix ix
where:
ZÄ = the number of pensions awarded to the widows of insured men
or invalid pensioners who died within a year at age x.
Ax
= the number of healthy insured men aged x.
<¡x = the mortality rate of a healthy male at age x.
3X = the number of male invalids aged x.
Qx = the mortality rate of a male invalid at age x.
In the calculation of Wx the numbers Zx, Ax and J^. are taken from
statistics for the years 1925-4930 and the mortality rates of healthy
males are deduced from the general mortality table for 1924-1926. To
obtain the invalid mortality rates a combined table was constructed by
adopting the figures in previous returns 3 down to age 64 and by having
recourse after that age to the general mortality table for 1924-1926.
The probability that the death of a healthy insured male, aged x, will
give rise to the payment of a widow's pension is obtained from the
product
?* W* •
The probability that the death of an invalid insured male, aged x,
will give rise to the payment of a widow's pension is obtained from the
product
?x wx •
1
2
See Part I, p. 286.
Cf. Statistik des Deutschen Reichs, Bd. 401, or Statistisches Jahrbuch für
das Deutsche Reich, 1929, pp. 36, 38.
3
See Drucksachen des Reichstags, 12. Legislaturperiode, 1. Session, 1907,
No. 226, p. 33.
404
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
RATES OF CESSATION OF WIDOWS' PENSIONS
Investigations .Preparatory to the 1933 Reform
After an examination of the experience of the years 1925-1929, the
female mortality table for 1891-1900 x was adopted for the rates of
cessation of widows' pensions.
§2. — Insured Population
The workers' insurance scheme includes compulsorily, with a few
exceptions, all wage-earning manual workers, whatever their wages,
age, sex and nationality.
Investigations Preparatory to the 1933 Reform
The insured population was estimated in quinquennial age groups
for each year from 1930 to 1940 and at five-yearly intervals from 1940
to 1970.
Since the data collected by the insurance institutions were neither
sufficiently reliable nor complete enough for the purpose, recourse had
to be had to information obtained from the general censuses and in
particular to two tables of estimates relating to the progress of the
total population and the employed population respectively. The first
gives the estimated progress of the total population in quinquennial
age groups for males and females separately from 1928 to 2,000, based
on the general German mortality for 1924-1926 and on the assumption
that the birth rate would decrease by 25 per cent, in a parabolic curve
from 1927 to 1955 and would then remain constant at that level 2 .
The second table gives the age distributions, for males and females
separately, of the employed population between the years 1925 and
1940, based on data from the industrial census of 1925 3. The
employed population is obtained from the total population in each
age group by means of an " employment ratio " which is assumed to
be constant. On the further assumption that the ratio of the insured
population to the employed population remains constant in each age
group table III was constructed. This table forms the fundamental
basis underlying all the estimates in the 1933 technical memorandum.
1
2
3
Statistik des Deutschen Reichs, Bd. 200.
Ibid., Bd. 401, II, pp. 652-653.
Ibid., Bd. 408, pp. 318-319.
TABLE III.
Age group (years)
1930
ESTIMATED MOVEMENT OF INSURED POPULATION
1931
1932
1933
1934
193
(a) Males
20-25
25-30
30-35
35-40
40-45
45-50
50-55
55-60
60-65
2,371,515
2,169,939
1,838,974
1,238,922
1,038,666
929,330
861,175
811,936
638,987
429,548
2,170,506
2,187,509
1,850,655
1,314,775
1,052,887
928,844
865,991
804,601
661,339
441,346
1,970,806
2,166,560
1,870,945
1,382,726
1,075,536
932,732
871,289
794,515
• 695,962
438,028
1,758,666
2,159,126
1,873,404
1,462,792
1,110,298
928,358
878,032
789,472
706,480
454,251
1,666,346
2,125,337
1,910,909
1,505,459
1,154,015
928,844
887,183
782,136
715,683
467,893
1,687
2,088
1,931
1,543
1,212
933
888
779
719
478
12,328,992
12,278,453
12,199,099
12,120,879
12,143,805
12,263
(i>) Females
Under 20
20-25
25-30
30-35
35-40
40-45
45-50
50-55
55-60
60-65
1,637,282
1,424,199
784,827
478,542
402,708
289,088
259,758
222,961
171,779
118,293
1,497,929
1,429,538
788,721
485,467
411,179
292,436
264,350
222,843
177,962
121,307
1,357,656
1,411,741
797,289
490,661
419,487
297,458
269,466
220,963
189,092
119,611
1,210,945
1,404,178
797,029
502,608
427,144
300,420
274,452
222,138
192,577
124,226
1,142,878
1,381,487
809,491
505,897
434,149
305,056
280,880
221,550
197,299
127,617
1,153
1,356
815
512
440
31
28
22
20
130
5,789,437
5,691,732
5,573,424
5,455,717
5,406,304
5,42
TABLE III. — ESTIMATED MOVEMENT OF INSURED POPULATIO
(continued)
Age group (years)
1939
1940
1945
1950
19
(a) Males
Under 20 . . . .
20-25
25-30
30-35
35-40
40-45 . . '
45-50
50-55
55-60
60-65 .
Total
2,217,648
1,366,433
1,891,849
1,603,962
1,473,199
1,037,233
888,147
803,226
692,894
536,105
2,270,028
1,282,636
1,858,033
1,620,818
1,510,596
1,089,727
892,963
804,601
. 690,702
539,055
2,045,448
1,923,954
1,141,750
1,559,715
1,585,915
1,357,541
1,042,272
808,269
713,054
517,669
2,004,199
1,729,328
1,712,317
958,163
1,526,397
1,425,588
1,298,024
943,973
716,560
534,261
1,88
1,69
1,53
1,43
93
1,37
1,36
1,17
83
53
12,510,696
12,559,159
12,695,587
12,848,810
12,77
(f>) Females
m
Under 20
20-25
25-30
30-35
50-55
55-60
60-65
Total
. . . . . . . . . . .
1,510,807
884,952
790,798
528,751
465,427
334,286
301,083
240,943
199,097
150,220
1,547,140
825,332
776,260
532,387
471,455
339,051
306,069
Ï
244,704
200,222'
152,481
1,394,449
1,235,107
472,246
507,109
489,863
363,131
334 537
262,569
219,895
152,387
1,372,833
1,108,304
706,941
308,525
466,405
377,167
358,283
287,016
235,971
167,362
1,28
1,09
63
46
28
35
37
30
25
17
5,406,364
5,395,101
5,431,293
5,388,807
5,23
407
GERMANY
EXPERIENCE
From the data collected by the insurance institutions themselves it
was possible to estimate the total number of insured persons and their
distribution according to age and sex. The first results of investigations x
made in 1934 were published in 1935 separately for the territorial
insurance institutions and for the institutions connected with the special
schemes (the Reich Railways pension funds, the miners' fund and
the seamen's fund). They refer to the year 1933 for the territorial
institutions, to 1 January 1934 for the Reich Railways pension funds
and the miners' fund and to 1 July 1934 for the seamen's fund. Below
is reproduced the age distribution of 10,000 insured persons, applicable
to the total insured population, for males, females and both sexes
respectively. The absolute figures for the total insured population
have been estimated to be 11,490,000 males and 5,836,000 females.
DISTRIBUTION OF 1 0 , 0 0 0 INSURED PERSONS BY YEAR OF BIRTH FOR THE
TOTAL INSURED
Year of birth
1867
1868
1869
1870
1871
1872
1873
1874
1875
1880
1885
1890
1895
1900
1905
1910
1915
1920
a n d earlier
. . . . .
t o 1879
t o 1884
t o 1889
t o 1894
t o 1899
to 1904
to 1909
t o 1914
to 1919
and later
Total
POPULATION
Males
Females
Total
2
36
46
59
58
78
88
99
590
652
765
831
1,097
1,535
1,694
1,661
707
2
3
26
34
47
43
60
70
74
474
583
755
867
985
1,137
1,533
2,192
1,115
2
3
32
42
55
53
72
82
91
551
628
762
844
1,059
1,401
1,639
1,840
844
2
10,000
10,000
10,000
The approximate estimates made each year show that the number
of insured persons remained round about the figure 17-18 millions
during the whole period 1924-1934. The total insured population and
its age distribution were determined more exactly as at 1 January in
each of the years 1933, 1934 and 1935 [22: year 1937].
1
See Chapter IV, § 3, p. 438, where a brief analysis is made of the methods
used.
408
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
§ 3. — Number of Beneficiaries
1927
ESTIMATES
When the table of annual estimates for the period 1927-1931 was
constructed, a calculation was also made of the estimated annual
number of pensions in force from 1925 to 1975 [17: pp. 289-291]. The
figures at quinquennial intervals are reproduced below.
Year
Invalidity
and old-age
pensions
Widows'
(or widowers')
pensions
(in thousands)
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1,465
1,955
2,251
2,427
2,526
2,579
2,608
2,624
2,632
2,637
2,639
228
396
518
593
635
656
666
670
672
673
673
In this calculation it was assumed that the annual crop of insured
persons or survivors who became entitled each year to an invalidity,
old-age or widows' pension would remain invariable as regards both
numbers and age distribution. For the rates of cessation of invalidity
pensions recourse was had to the 1908 data obtained from the experience
up to the end of 1906 of the cessation of pensions granted in the period
1896 to 1905. The results indicated (see the table above) that as
from about 1960 the number of invalidity and old-age pensions and
of widows' and widowers' pensions would remain practically stationary.
INVESTIGATIONS PREPARATORY TO THE 1933
REFORM
The estimates of the annual numbers of beneficiaries in receipt of
the various benefits were obtained by applying the biometrie factors
described in § 1 of this chapter to the annual numbers of the insured
GERMANY
409
populations appearing in table III. Distinction was made between
the pensions in force on 1 January 1931, the annual number of which
was obtained merely by applying the cessation rates to the initial
figures, and pensions granted after 1 January 1931, for which account
had to be taken of both the probabilities of award and of cessation.
As regards invalidity and old-age pensions the figures relating to
cessation were obtained directly up to 1950, after which date extrapolation was used by means of a curve of the second degree.
For widows' pensions the number of pensions in force on 1 January
1931 was taken from the statistical data of the insurance scheme and
was then projected by means of the cessation rates mentioned above
(1891-1900 table of female mortality).
For widows' pensions granted after 1 January 1931, there are three
distinct classes:
(a) those which follow invalidity and old-age pensions which were
in force on 1 January 1931;
• (b) those which follow invalidity and old-age pensions granted after
1 January 1931; and
(c) those which are granted on the death of a healthy insured person.
For all these classes the annual crops of new pensions are obtained
by using the probabilities defined above. Direct calculation up to
1980 can be made only for class (c). For the remaining two classes
the available data did not allow direct calculation beyond 1950, after
which date figures were obtained by extrapolation. For class (a) a
straight-line decrease was assumed between 1950 and 1980, while for
class (¿>) practically the same result was obtained either by direct
extrapolation, using the method of least squares, or by assuming from
1950 a constant ratio between the number of widows' pensions and the
number of invalidity and old-age pensions. The annual numbers of
cessations of pensions are obtained up to 1950 by means of the cessation
rates mentioned above, after which date figures are obtained by extrapolation by a curve of the third degree.
As regards orphans' pensions, in the absence of appropriate data
and because of their secondary importance compared wif.h the invalidity,
old-age and widows' pensions, the annual numbers were estimated
summarily. Taking into account the war orphans and the fall in the
birth-rate it was assumed that the total number of orphans' pensions
would decrease year by year until 1935. The decrease actually experienced between 1928 and 1931 was assumed to be prolonged until
1935, at which date the number of pensions was taken as 500,000.
From 1935 the calculations were based on the hypotheses already
mentioned: viz. a parabolic decrease in the birth-rate from 1927 to
1955, entailing a total decrease of one-quarter of the initial figure,
and a constant birth-rate after 1955.
These estimates were then revised in order to take into account the
legislative amendments made by the crisis decrees, in particular the
extension of the waiting period. The following figures were thus
obtained, which are appreciably below the results of the first calculations.
410
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
TABLE IV.
ESTIMATED ANNUAL NUMBER OF B E N E F I C I A R I E S
(in thousands)
I n t h e m i d d l e of t h e year
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1955
1960
1965
1970
1975
1980
Number of
invalidity
and old-age
pensions
in payment
Number
of widows'
pensions
in p a y m e n t
Number
of o r p h a n s '
pensions
in p a y m e n t
2,481
2,503
2,575
2,642
2,705
2,771
2,836
2,906
2,977
3,040
3,092
3,133
3,178
3,227
3,266
3,298
3,322
3,353
3,491
3,584
3,647
3,693
3,650
3,419
592
610
629
648
666
684
701
718
735
752
769
785
800
815
829
842
855
867
899
885
822
756
707
663
359
355
351
348
344
341
337
334
316
299
281
266
256
246
239
232
EXPERIENCE
The annual report of the Reich Insurance Office [22] includes a very
complete series of statistical data relating to beneficiaries. In particular
there are a general table showing the annual movement in the number
of pensions in each category, an analysis of the year's crop of new
pensions (age and sex distribution of invalidity and old-age pensions
and of widows' pensions; marital status of invalidity and old-age
pensioners; distribution of widows according to husband's age at death;
age distribution of orphans; distribution of orphans according to age
of father—or mother—at death; etc.) an analysis of the cessations of
pensions (age distribution for invalidity and old-age pensions and for
widows' pensions, average duration of pensions, etc.) and finally an
analysis of the pensions in payment at the beginning of the year.
Only the principal data are here reproduced relating to the pensions
in payment at the beginning of each year, i.e.:
411
GERMAN'S
(1) the number of pensioners in each class:
TABLE V. —• NUMBER OF B E N E F I C I A R I E S :
EXPERIENCE
Pensions
Current on 1 January
in the year
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
. . . . .
. . . . .
Invalidity
and old-age
Widows'
Orphans"
1,230,347
1,372,174
1,529,070
1,660,652
1,766,881
1,888,717
2,014,418
2,163,538
2,285,712
2,296,920
2,393,566
2,422,088
2,443,954
2,459,201
2,478,950
157,312
187,805
233,401
277,619
334,280
389,329
490,764
640,183
651,732
559.592
580,479
594,854
612,343
630,389
649,935
828,619
779,384
735,884
695,613
649,486
545,411
349,030
350,112
334,754
311,762
294,746
283,651
(2) the sex distribution of the total number of invalidity and old-age
pensioners, published from 1930 onwards as percentages, viz:
On 1 January
1930
1931
1932
1933
1934
1935
1936
1937
1938
.
Males
Females
Total
64.1
64.8
65.4
65.3
66.5
66.8
67.1
67.3
67.5
35.9
35.3
34.6
34.7
33.5
33.2
32.9
32.7
32.5
100
100
100
100
100
100
100
100
100
(3) the age distribution of invalidity and old-age pensioners and of
pensioned widows:
co^iocooìcof-t-cDco©
. o * © r - - o lísoiocococoeo
j o i-* TH o í o í eo »ri t-* o i I H o í
i-eoco
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. o* o CD o - * eo o i of CD r* »ft
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100.00
100.00
100.00
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100.00
100.00
100.00
100.00
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T-COCO
•rtOi-*
100.00
ooooor^'fl'cocoi-icor-1-'
. OÍ CO »Í3 CO CO Oi »ft i-" O Oi C| o o -ri -ri o í eo **' r-" o i o í co"
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i-i O i - *
100.00
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100.00
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1 o i-« i - oí OÍ" co io t-" eo o oí
100.00
100.00
100.00
100.00
100.00
100.00
100.00
(OMiHtûoOt*-C"iOOfO»#
. CNCT>t-> I H m o i I H 00 P- O0 if)
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cnoiotûcoodcooforo< era CD i - i n eo i * eo • * oo co
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(b)
Invalidity and old-age pensions
T H I N eo
©OÍIHOO-3<IH*Í"CDCOOÍCO
:
1.1.1934
1.1.1933
1.1.1931 1.1.1932
o o o o* i-" eo" t-* •*" »ft t*"
iHoi<r
100.00
•4
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Total . . .
o
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.
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ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
1.1.1935
412
CHAPTER II
FINANCIAL ESTIMATES, BASES AND EXPERIENCE
§ 1. — Contributions
WAGE CLASSES AND RATES OF CONTRIBUTION
Insured persons are divided into wage classes as in the pre-1914
period. Insured persons in the same class must pay the same contribution, which is payable in equal parts by the insured person and his
employer.
From 1 January 1924 to 27 September 1925 the wage classes and the
rates of contribution were fixed as follows:
Class
I
II
Ill
IV
V
<
Weekly wage
in RM.
Total weekly rate
of contribution
in RM.
10 a n d u n d e r
10 to 15
15 t o 20
20 t o 25
More t h a n 25
0.20
0.40
0.60
0.80
1.00
As from 28 September 1925 the number of wage classes was increased
to six and at the same time the rates were fixed as indicated below and
as from 27 July 1927 the rates were increased so as to represent 5 per
cent, of the upper wage limit of each class.
Weekly wage
in RM.
Wage class
Total weekly rate of
contribution
in RM.
From 28.9.25
to 26.6.27
I
II
Ill
IV
V
VI
•
6 and u n d e r
6 to 12
12 t o 18
18 t o 24
24 t o 30
M o r e t h a n 30
0.25
0.50
0.70
1.00
1.20
1.40
From 27.6.27
to 31.12.27
0.30
0.60
0.90
1.20
. 1.50
1.80
414
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
The rates which came into force on 27 July 1927 still apply to the
first five wage classes but new wage classes have since been created.
As from- 1 January 1928 class VI is restricted to insured persons
whose weekly wage is more than 30 RM. but not more than 36 RM.,
the rate of contribution being retained at 1.80 RM. At the same time
a new class VII was created for wages in excess of 36 RM. with arate of
contribution of 2 RM.
On 1 January 1934 an upper limit of 42 RM. was imposed on class VII
and the rate of contribution was increased to 2.10 RM. On the same
date a new class was created for wages in excess of 42 RM. with a rate
of contribution of 2.40 RM.
On 4 April 1938 class VIII in its turn had an upper limit of 48 RM.
imposed, with 2.40 RM. as the rate of contribution, and as from that
date a new class IX was introduced for insured persons whose weekly
wage exceeded 48 RM., the total weekly rate of contribution being fixed
at 2.70 RM.
To sum up: as from 4 April 1938 the insurance scheme includes, first,
eight classes whose weekly wage limits rise by 6 RM., the total weekly
rate of contribution being fixed at 5 per cent, of the upper wage limit
and a ninth class for wages in excess of 48 RM. who pay weekly a total
contribution of 2.70 RM.
ESTIMATES OF CONTRIBUTION INCOME
Investigations Preparatory to the 1933 Reform
The probable number of weeks' contributions was obtained for each
financial year by multiplying the total insured population by the mean
number of weeks' contributions per annum per insured person. This
number was then multiplied by the mean value of the weekly contribution.
The total insured population has been invariably taken from table III.
As regards the mean number of weeks' contributions per annum and
per insured person
and the mean value of the weekly contribution, the
following figures x have in turn been adopted:
(a) 43 weeks and 1.40 RM. on the basis of the experience of the years
1928-1929, that is, during a prosperous economic period;
(b) 28.6 weeks and 1.23 RM. on the basis of the unemployment and
wages levels experienced at the beginning of 1933;
(c) 43 weeks and 1.23 RM. on the basis of the 1929 level of unemployment and the 1933 wages level.
Each of the estimates was subsequently modified to take into account
the increase in the contribution income due to the extension of the wage
classes which was then contemplated and which was finally introduced
by the 1933 Act.
1
These three sets of figures correspond with three hypotheses which were
repeatedly used in the investigations preparatory to the 1933 reform and to
which several references will again be made.
415
GERMANY
EXPERIENCE
From the numerous statistics published each year on the number and
total amount of contributions [22] the figures in table VII are extracted,
which give:
the number of weekly contributions received each year;
the total amount of the weekly contributions received each year;
the average value of the weekly contribution.
TABLE V I I .
Year
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1935
1936
1937
. . . . . .
CONTRIBUTIONS:
Number of weekly
contributions
625,654,957
759,940,599
679,361,798
773,916,139
767,703,458
766,485,122
697,869,314
605,399,582
524,409,176
568,565,059
654,143,941
702,772,322
749,743,726
805,586,155
EXPERIENCE
Contribution
income in
thousands
of RM.
Average
amount of
a weekly
contribution
362,525
548,934
659,600
875,217
1,075,845
1,092,046
986,368
819,197
642,210
678,680
843,757
945,328
1,044,007
1,160,533
0.58
0.72
0.97
1.13
1.40
1.42
1.41
1.35
1.23
1.19
1.28
1.34
1.39
1.44
• (RM.)
Together with these statistics tables and graphs are published showing
in particular the sub-division of the contributions according to the various
wage classes and enabling a comparison to be made of the variations in
the contribution income with those in the number of employed workers
or with those in the number of the unemployed.
§ 2. — State Aid
State aid includes, first, the individual supplements which the Reich
Government adds to each invalidity and old-age pension and to each
widow's or orphan's pension. The amount of the Reich supplement to
an invalidity and old-age or a widow's pension, which on 1 January 1924
was fixed at 36 RM. per annum, was increased to 48 RM. on 1 August
1924 and then raised to 72 RM. on 1 April 1925, since which date it has
not altered. For orphans' pensions the amount of the supplement has
always been one-half of the above figures (except for the period from
1 January to 31 July 1924, during which the supplement to the orphan's
pension was 24 RM.).
To these individual supplements the following were added:
(1) as from 1927 a grant made to the insurance institutions to allow
them to increase, in calculating the amount of pension, the contri-
416
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
butions paid before 30 September 1921, that is to say, the contributions which were depreciated as a result of the devaluation of
the mark;
(2) for a number of years a grant-in-aid provided out of the receipts
from customs duties, the amount being originally fixed at 40 million RM. in 1926, reduced to 20 million RM. in 1930, to 8 million
RM. during the next two years (1931 and 1932) and thereafter
being entirely abolished *.
As from 1 January 1934 State aid includes the cost of the individual
supplements and a lump-sum payment fixed at first at the annual
amount of 200 million RM. and increased to 204 million RM. at the
time of the return to the Reich of the Saar Territory.
In the investigations preparatory to the 1933 reform it was estimated
that, assuming the lump-sum payment to be 200 million RM. per
annum, the total of the Reich subsidies would amount to the following
sums (in million RM.):
1935
1940
1945
1950
1955
434.6
463.8
488.3
504.8
616.1
1960
1965
1970
1975
1980
521.2
521.0
519.3
512.7
493.2
The amounts of the sums paid by the Reich Government each year
under the various sub-heads described above are shown in table VIII.
TABLE V I I I .
STATE A I D :
EXPERIENCE
(annual amounts in millions of RM.)
Year
firant in
respect of
revalorisation
of contributions
paid before
Individual
supplements
30.9.1921
Share in
the yield
of certain
customs
duties
Total
in millions of RM.
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
95.6
161.5
184.5
186.0
195.7
205.8
224.7
234.9
214.4
220.5
227.0
229.3
230.6
232.0
.
24.6
124.6
179.5
171.0
165.3
158.3
174.8
216.0
203.3
204.0
204.0
40.0
40.0
40.0
40.0
20.0
8.0
8.0 .
..
95.6
161.5
224.5
250.6
360.3
425.3
415.7
408.2
380.7
395.3
443.0
432.6 .
434.6
436.0
From 1924 to 1930 the Reich Government repaid to the Post Office the
administration expenditure due to the sale of stamps and the payment of
benefit; the total amount of this charge, which since 1930 has been borne by
the institutions themselves, is shown below, p. 425.
GERMANY
417
The Reich also shares in the cost of granting increments for periods
of military service, labour service and war services 1.
Under the Order of 1 September 1938 2 the following payments fall
to be made by the Reich Government:
(1) in respect of increments relating to military service 19.8 million
RM. per annum until 1 April 1938, and 14.5 million RM. per
annum after that date ;
(2) in respect of increments granted to ex-service men, having regard
to their war services, 20 million RM. per annum.
§ 3. — Other Receipts
SUMS CREDITED AS INTEREST INCOME
The total amount of the sums which have been received by the
insurance institutions
in respect of interest on investments will be
seen in Chapter IV 3 .
GRANTS FROM THE UNEMPLOYMENT INSURANCE SCHEME
As from 1938, under the Act of 21 December 1937, the unemployment
insurance scheme transfers to the workers' insurance scheme each year
a grant equal to 18 per cent, of the contributions received by the
workers' insurance scheme during the year in question.
§ 4. — Benefits
CONDITIONS GOVERNING AWARD OF BENEFIT
The invalidity pension and the old-age pension are very closely
connected. When an insured person attains age 65 he is considered
to be an invalid and is entitled, subject to the fulfilment of the required
conditions, to a life pension the amount of which is exactly equal to
that of the invalidity pension
which he would receive if he became an
invalid at that moment 4 .
Up to 31 December 1931, every insured person in respect of whom
at least 200 compulsory weekly contributions had been paid was
entitled :
(a) in the event of invalidity, to an invalidity pension for as long
as the invalidity lasted;
(b) as from age 65, to a life pension equal in amount to the invalidity
pension.
1
2
See below, pp. 419-420.
See Reichsarbeitsblatt, IV, 1938, No. 26, or Industrial and Labour Information,
Vol. LXVIII, No. 10, 5 December 1938.
3
Pages 437-438.
4
For this reason reference is made to " invalidity and old-age pensions "
almost throughout Part II of this monograph. It should be noted, however,
that from 1 January 1932 a distinction between invalidity and old-age pensions
has again been made, since their award is conditional on the completion of
two different qualifying periods.
27
418
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
As from 1 January 1932, and up to 31 December 1937, every insured
person in respect of whom at least 250 compulsory weekly contributions
had been paid was entitled in the event of invalidity to an invalidity
pension for the duration of the invalidity. If the number oí weekly
contributions actually paid reached 750 and if the insured person was
aged 65 or more he was granted a life pension equal in amount to the
invalidity pension.
The same conditions continue to apply, but as from 1 January 1938
the required number of weekly contributions has been increased:
from 250 to 260 for the invalidity pension, and
from 750 to 780 for the life pension.
Widows' and orphans' pensions have invariably been subject to the
same conditions regarding waiting-period as invalidity pensions.
Widows' pensions are granted only to widows.who are invalid or
who have attained age'65.
AMOUNT OF BENEFIT
Up to 31 December 1933, invalidity and old-age, widows' and
orphans' pensions 1 were composed of three portions; a Reich supplement
of fixed amount, a fixed basic sum and an increment dependent upon
the number and amount of the contributions paid. As from 1 January
1934, they consist only of the Reich supplement, which forms the basic
sum, and the increment which has been increased in amount.
Invalidity and Old-Age Pensions
i
An account has been given above of the Reich supplement to invalidity
and old-age pensions and the modifications which it has experienced.
The basic sum remained fixed at:
120 RM. fr.om 1 January 1924" to 31 July 1925;
168 RM. from 1 August 1925 tö 30 June 1932;
84 RM. from 1 July 1932 to 31 December 1933.
It was abolished on 1 January 1934, as from which date the fixed
portion of the pension consists solely of the Federal supplement, which
thenceforth takes the place of the basic sum.
In the beginning, from 1 January 1924 to 31 March 1925, the increment was related only to the contributions paid since 1 January 1924,
being fixed at one-tenth of their amount. On 1 April 1925 a second
increment came into force relating to contributions paid before 30 September 1921, the amount in the various wage classes being amended
several times as indicated below.
1
Apart from these pensions medical benefits may be granted to insured
persons and invalids with a view to the prevention or cure of invalidity.
419,
GERMANY
PENSION INCREMENT CORRESPONDING TO A WEEKLY CONTRIBUTION
PAID BEFORE 3 0 JANUARY 1921
(in RM.)
Period of grant ol pension
Wage class
From 1.4.1925 From 1.4.1927 From 1.4.1928 From 1.10.1929
to 31.3.1927
to 31.12.1933
to 30.9.1929
to 31.3.1928
I . . . .
11 . . . .
III . . . .
0.02
0.04
0.08
0.14
0.20
0.02
0.04
0.07
0.10
IV . . . .
V . . . .
0.04
0.08
0.14
0.20
0.30
0.03
0.06
0.12
0.18
0.27
As from 1 August 1925 the ratio of the increment to the contributions
paid after 1 January 1924 was raised from 10 per cent, to 20 per cent.
Cince 1 January 1934 the increment has been calculated both for contributions paid before and after the inflation on the basis of the following
scale (subject to a minimum of 72 RM. per annum):
Increment corresponding
to a weekly
contribution
(in EM.)
Wage class
I
II
Ill
IV
V
VI
VII . . "
VIII
IX
014
To the pension itself is added a bonus for each dependent child.
This bonus was fixed as follows:
From
From
From
From
From
1.1.24
1.8.25
1.7.26
1.4.28
1.7.32
to 31.7.25
to 30.6.26
to 31.3.28
to '30.6.32
. . . .
36 RM. per annum per child under 18
90 „
„
,
18
90 »
„
„
„
„
„ 15
120 „
„
„
„
„
„ 15
""
>>
)>
ÎI
!>
>)
>!
1 5
Under the Act of 24 December 1937 periods of compulsory military
service and of labour service and periods of war service are taken
into account for pension increments as well as weeks of contributions,
provided that the insured person had previously paid at least one
contribution to the workers' insurance scheme or to the salaried
employees' or miners' schemes.
420
ACTUARIAL T E C H N I Q U E AND FINANCIAL
The Order
conditions of
three periods
of the charge
ORGANISATION
of 1 September 1938 lays down the amounts and the
award of the increments due in respect of each of these
of service and at the same time it fixes the proportion
under this head which is to be borne by the Reich 1.
Widows' Pensions
An account has been given above of the Reich supplement to widows'
pensions and the modifications which it has undergone.
From 1 January 1924 to 30 June 1932 the basic sum remained fixed
at 6/10 of the basic sum applicable to the invalidity and old-age pension.
From 1 July 1932 to 31 December 1933 the ratio between the two
basic sums was reduced to 5/10. The basic sum was abolished on
1 January 1934, as from which date the Federal supplement takes its
place.
From 1 January 1924 to 30 June 1932 the increment remained
fixed at 6/10 of the invalidity pension increment which the husband
was receiving or which he would have received in the event of becoming
invalid; this coefficient was reduced from 6/10 to 5/io as from 1 July
1932.
Orphans' Pensions
An account has been given above of the Reich supplement to orphans'
pensions and the modifications which it has experienced.
From 1 January 1924 to 30 June 1932 the basic sum remained fixed
at 5/10 of the basic sum applicable to the invalidity and old-age pension.
From 1 July 1932 to 31 December 1933 the ratio between the two
basic sums was reduced to */10. The basic sum was abolished on
1 January 1934, as from which date the Reich supplement takes its
place.
From 1 January 1924 to 30 June 1932 the increment remained fixed
at 8 / 10 of the invalidity pension increment which the father (or mother)
was receiving or which he (or she) would have received 6 in the4 event
of becoming invalid; this coefficient was reduced from /10 to /io as
from 1 July 1932.
MAINTENANCE OF BENEFIT
RIGHTS
In accordance with the provisions in force in 1924, the right to
benefit expired when the stamps appearing on an insurance card two
years after the date of issue did not represent at least 20 weekly contributions. Nevertheless, pensions were granted in cases where the
period between the date of entry into insurance and the occurrence of
the event insured against was covered by contributions actually paid
to the extent of at least three-quarters.
For the purpose of maintenance of benefit rights the following were
counted as weekly contributions in addition to insurance stamps affixed
to insurance cards:
(1) contributions to the salaried employees' insurance scheme;
(2) periods during which the insured person was in receipt of an
invalidity pension under the workers', miners', salaried employees'
or industrial accident scheme;
(3) periods served in the German or allied army during the 19141918 War.
1
See above, pp. 415-417.
GERMANY
421
These provisions suffered many amendments. On 1 January 1938
the following regulations came into force.
Maintenance of benefit rights is made conditional on the payment
each civil year of at least 26 weekly contributions. This condition is
not required to be fulfilled for the first year of insurance or in cases
where the insured person was invalid in the course of the year. Nevertheless, pensions are granted in cases where the period between the
date of entry into insurance and the occurrence of the event insured
against is covered by contributions to the extent of at least one-half.
For the purpose of maintenance of pension rights the following are
reckoned as contributions: weeks of
(1) military service;
(2) labour service;
(3) attendance at a course of industrial training or ideological
instruction recognised by the Reich Insurance Office;
(4) sickness, and maternity involving incapacity for work;
(5) unemployment during which the insured person is in receipt of
unemployment benefit or public assistance.
PRESERVATION OF RIGHTS IN COURSE OF ACQUISITION IN THE CASE
OF TRANSFERS BETWEEN THE WORKERS' INSURANCE SCHEME AND
THE SALARIED EMPLOYEES' OR THE MINERS' INSURANCE SCHEME
(•Wanderversicherung)
The methods by which the three insurance schemes for workers,
salaried employees and miners are co-ordinated are rather complex;
the present description is confined to the general principles on which the
provisions concerning transfers between the workers' and the salaried
employees' schemes are based.
The establishment and maintenance of pension rights are determined
with reference to the total of the contribution periods, including periods
assimilated with contribution periods, completed in all the insurance
institutions to which the person in question has belonged.
For the calculation of the pension, a distinction must be made between
the basic pension on the one hand and the increments on the other.
Although the qualifying period is roughly the same in both schemes
(five years), the basic pension for workers (72 RM. a year) is lower
than that for salaried employees (360 RM. a year); each institution
must pay the fixed pension component prescribed by its regulations
if the contribution periods completed with it are not less than the
qualifying period. If this condition is not satisfied, it pays the said
fixed component multiplied by a reduction coefficient. The coefficient is
obtained from the ratio of the total contribution periods completed with
the institution in question to the qualifying period fixed by its regulations.
Supplementing these rules is a clause setting a maximum to the fixed
pension component that the insured person may receive, which may
not exceed the highest such component, namely, 360 RM. a year.
When this last clause applies, the amount by which it reduces the result
obtained from the application of the general rule is deducted from the
liability of the institution where the level of pensions is lowest, namely,
the workers' insurance institution.
422
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
The increments to which the insured'person has acquired a right
from one of the institutions are.normally paid in full by that institution.
When, however, he receives all or part of the basic pension from the
ò
salaried employees' insurance institution, i.e. — x 360 RM., the increments due from the workers' insurance institution are reduced by á
i>
sum equal to — X 144 RM. (If the increments due from the latter
q
scheme do not exceed this figure they are withdrawn altogether.)
The application for pension may be submitted to either of the
institutions to which the insured person has belonged, and the institution in question must then pay the whole of the pension, being entitled
to reimbursement for any component paid on behalf of any other
institution 1 .
•
ESTIMATES OF THE ANNUAL COST OF BENEFITS
Investigations Preparatory to the 1933 Reform
The average annual amount of pension in the three categories was
calculated from an examination of pensions granted before 1 January
1931 and pensions granted after that date. These average amounts
multiplied by the number of beneficiaries for each category gave the
total emerging costs. The sum of these emerging costs added to the
cost of administration gave the estimated total expenditure under the
scheme.
In order to calculate the average amount of pension, each constituent
element was examined in turn. For thé basic sum and Reich supplement recourse was had to the experience of the scheme itself. As
regards the increments proportioned to the number and amount of
contributions paid, the method adopted was, in the case of invalidity
and old-age pensions, to follow out a theoretical " average insurance
life", separately for each sex. Increments due to contributions paid
before the inflation were calculated and then increments due to those
paid after, the inflation. In the case of widows' pensions it was found
that, on the basis of the actual experience of the scheme, the number
of contributions to be taken into account in calculating increments in
respect of a widows' pension could bë obtained from the number of
contributions to be taken into account in calculating increments in
respect of an invalidity and old-age pension on the assumption that
the payment of the latter had taken place five years earlier. This
relationship applies to all contributions, whether paid before or after
the inflation. It follows, therefore, that in order to obtain the number"
of contributions which govern pension increments in these two casés
it is sufficient to use the figures obtained for invalidity and old-age
ensions and tó make therefrom a deduction equivalent to five years.
he calculation of the average amount of orphans' pensions was made
in a similar manner to that adopted in the case of invalidity and old-agè
pensions.
These methods were applied, with variations, to benefit payment's
in force in 1931, to the payments reduced by the Emergency Decrees
P
1
See below, p. 426.
423
GERMANY
and finally to the payments consequent upon the legislation which
came into force on 1 January 1934. As in the case of the estimate
of the contribution income, account was taken in turn of three hypotheses
regarding the progress of economic conditions, namely:
(a) the economic conditions prevailing in 1929 would remain unaltered;
(b) the rate of unemployment and the.wages level would remain
the same as at the beginning of 1933;
(c) unemployment would return to the 1929 figures but wages would
remain at the 1933 level.
In table IX are reproduced the estimates made on each of these
three hypotheses for the annual emerging cost of benefits payable by the
insurance institutions under the legislation which came into force on
1 January 1934.
TABLE IX.
TOTAL ANNUAL AMOUNT OF B E N E F I T
MADE BY INSTITUTIONS
PAYMENTS
(estimated in thousands of RM.)
Hypothesis
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
(a)
(ft)
(c)
536,254
897,956
1,050,398
1,169,905
1,265,748
1,333,159
1,377,632
1,416,815
1,425,684
1,352,254
734,065
878,914
949,762
1,060,725
1,082,167
1,067,203
1,017,660
955.710
863,664
718,013
735,055
889,586
1,027,305
1,126,412
1,194,637
1,234,475
1,246,053
1,252,705
1,226,923
1,131,721
EXPERIENCE
Average Amount of Monthly Pensions
The average amount of current pensions calculated for each calendar
quarter is published every year [22].
Figures are reproduced below (table X (a)) for the first quarter of
each year -, which show clearly the effect of the increase in pension scales
which took place in 1927 and the subsequent reductions in 1932.
424
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
The second part of the same table (X (b)) refers to the annual crops
of newly awarded pensions, in respect of which the average amounts
are appreciably higher.
TABLE x (a).
AVERAGE MONTHLY AMOUNT OF CURRENT P E N S I O N S :
EXPERIENCE
(in RM.)
Period .
Y e a r 1926
F i r s t q u a r t e r 1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1
Invalidity
and old-age
pensions
Widows'
pensions
Orphans'
pensions
24.92
25.32
29.34
33.31
35.55
36.25
35.83
30.10
30.15
30.59
30.74
30.79
30.78
14.27
14.26
19.18
21.63
21.03
21.69
10.02
10.20
13.17
14.28
14.95
14.98
.
.
.
.
.
.
.
.
.
.
.
.
i
i
18.59
18.85
19.09
19.27
19.32
19.11
11.16
11.08
10.98
10.80
10.53
10.10
Not calculated.
TABLE X (¿>).
AVERAGE MONTHLY AMOUNT OF N E W L Y
PENSIONS: EXPERIENCE
AWARDED
(in RM.)
Invalidity and old-age
pensions
1930
1931
1932
1933
1934
1935
1936 (whole y e a r )
1937
»
i Not calculated.
. . . . . '
Males
IFemales
Total
45.88
47.25
47.76
40.17
38.16
37.38
37.98
37.57
28.29
28.83
29.32
22.56
19.63
19.66
19.96
19.48
40.60
42.03
42.99
35.52
32.53
32.08
32.31
i
Widows' Orphans'
pensions pensions
20.37
22.42
24.70
20.54
19.35
19.55
19.86
18.31
. . .
16.68
17.10
16.74
12.04
10.31
10.59
10.62
10.09
. . . . . . . . . . .
Total Amount paid each Year for each Class of Pension
The total annual cost of invalidity and old-age, widows' and orphans'
pensions, including State aid, is shown in table XI, which demonstrates
the results of the increase in pension scales in 1926 and 1927 and also
the effect of the general reductions applied in 1932.
425
GERMANY
TABLE X I . — TOTAL AMOUNT OF PENSIONS PAID EACH Y E A R : E X P E R I E N C E
(in thousands of RM.)
Year
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
. . . . . .
Invalidity
and old-age
pensions
Widows'
pensions
Orphans'
pensions
Total
245,748
404,484
533,158
617,107
753,331
863,632
973,052
1,043,277
938,153
879,503
905,626
922,730
929,573
933,592
20,323
33,817
48,248
67,998
97,727
121,627
171,104
183,500
141,788
130,759
136,109
141,787
146,566
151,457
81,697
109,331
128,542
118,073
131,428
131,539
127,125
117,429
58,502
48,214
47,429
44,435
40,940
38,284
347,768
547,632
709,948
803,178
982,486
1,116,798
1,271,281
1,344,206
1,138,443
1,058,476
1,089,164
1,108,952
1,117,079
1,123,333
§ 5. — Other Expenditure
ADMINISTRATION
EXPENSES
To the administration expenses of the insurance institutions themselves
and of the Reich Insurance Office must be added the payments made
to the Post Office for services rendered in the sale of social insurance
stamps and the payment of benefits.
In the investigations preparatory to the 1933 reform [20] the total
cost of administration was estimated at the constant figure of 70 million
RM.
. The actual cost of administration is given below in thousands of RM.
Year
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
Payments to the
Post Office i
Total cost
6,471
14,134
13,233
12,130
13,630
15,227
15,260
15,853
24,171
32,974
37,599
43,413
52,203
55,029
61,884
65,116
57,266
53,802
58,553
61,237
61,349
62,601
.
.
i Before 1930 these p a y m e n t s were made b y t h e Reich.
426
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
COST OF OPTIONAL MEDICAL BENEFITS
In the course of t h e investigations preparatory t o the 1933 reform,
it was necessary t o estimate t h e cost of optional medical benefits in
¡order t o include it i n t h e actuarial balance-sheets. The figures recorded
for 1931 and 1932 were t h o u g h t to be on t h e low side and the probable
¡expenditure under this head was assumed t o remain constant at
50 million RM. per annum.
The t o t a l sum applied to medical benefit is settled each year by
agreement between the insurance institutions; it amounted to the
following figures in thousands of. RM. :
1924
1925
1926
1927
1928
1929
1930 . . . . . .
23,336
41,287
50,496
60,106
78,188
97,622
99,315
1931
1932
1933
1934
1935
1936
1937
69,018
40,969
35,139
40,436
46,313
47,438
53,452
C O N T R I B U T I O N S TO THE M I N E R S ' INSURANCE SCHEME
As from 1938, under t h e Act of 21 December 1937, the workers'
insurance scheme h a s to p a y to the miners' scheme an annual contribution of 50 million RM.
R E P A Y M E N T S TO THE SALARIED E M P L O Y E E S ' INSURANCE S C H E M E
I t has been seen above t h a t , under t h e provisions made to preserve
the benefit rights of insured persons who transfer from the workers'
t o t h e salaried employees' scheme or vice versa, each insurance scheme
repays t o the other t h e benefit components paid on its account. Since
transfers from t h e workers' to the salaried employees' scheme are
much more numerous than transfers in the other direction the balance
of repayments is always to the benefit of the salaried employees' scheme.
The following amounts, in thousands of RM., were credited to the
salaried employees' scheme and debited to the workers' scheme:
1926
1927
1928 . . . : . .
1929
1930
1931
325
9,774
9,356
12,728
21,024
26,247
1932
1933 . . . . . .
1934
1935
1936
1937
25,150
unknown
28,980
30,120
31,036
31,922
CHAPTER III
FINANCIAL SYSTEM
§ 1. — Tables of Annual Estimates
ESTIMATES OF RECEIPTS AND EXPENDITURE FROM 1927 TO 1931
[17]
On the basis of the provisions of the Act of 28 July 1925, and making
allowance for the amendments made by the Acts of 25 June and
10 December 1926, a series of annual estimates was drawn up for five
consecutive years, showing the probable financial progress of the insurance scheme during a quinquennium.
TABLE XII. — PROBABLE FINANCIAL PROGRESS FROM 1927 TO 1 9 3 1
(in millions of RM.)
a
*C
ao
O
•4-i
CQ
CD
<U
S
•*-»
1927
1928
1929
1930
1931
687
694
701
708
714
a
o
E-i
o
W
Ï
13
17
17
17
18
8
8
8
8
8
708
719
726
733
740
446
486
526
566
607
te
o
a
i?
O
&
36
43
51
58
65
79
88
98
109
119
103
104
105
106
107
&
a
o
a
a>
a
"to
"ai
"53
C3
<L>
4
5
5
6
7
11
11
11
11
11
tfl CD
o
-*> a»
a •a
Surplus (+)
deflclency (—)
3
to
Ö
O
Repayment of
benefit components
to salaried
employees' scheme
Repayments to
Reich in respect
of payments for
revalorisation
of increments
+j
m
SS
O
Optional medical
beneflts and cost
of administration
Year
a
o
Expenditure
Invalidity and
old-age pensions
Receipts
679 + 29
0.6 737 — 18
800 — 74
4
867 — 134
11
939 — 199
23
On account of the improvement in employment and the increase in
wages the contribution income for 1927 was estimated to be 5 per cent.
in excess of that for 1926; the figure for each subsequent year being
obtained from the preceding year by adding 1 per cent. The expected
interest income was estimated on the basis of the experience of the
year 1925, having regard to the amount and probable yield of the
invested funds. Other items of income, consisting of fines and various
miscellaneous credits, were estimated on the basis of the corresponding
amounts received in 1925.
428
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
The estimated expenditure on invalidity, widows' and orphans'
pensions was calculated on the basis of the actual experience of the
period 1 October 1925 to 30 September 1926, during which the Act
of 28 July 1925 was in force. Adjustments were made to allow for
the amendments introduced by the Acts of 25 June and 10 December
1926. The cost of the optional benefits and administration expenses
were estimated at 15 per cent, of the contribution income, this fraction
being adopted after a consideration of the actual fractions 13.1 per cent.
and 13.5 per cent, which were obtained in 1924 and 1925. Miscellaneous
expenditure included, in addition to interest due on the deficit at the
rate of 7 per cent, (as from 1928), the repayment of pension increments
to the salaried employees' scheme and the repayments to the Reich
which it was thought could be charged to the insurance institutions
in respect of the expenditure incurred by the Reich for the revalorisation
of the increments.
Table XII led to the conclusion that contributions should be increased
by 11 to 12 per cent, in order to guarantee the equality of receipts and
expenditure in the period 1927-1931. It was observed also that a
stationary condition had not been arrived at, that is to say, that the
scheme was still in the period where the number of pensions in force
was increasing year by year.
ESTIMATE OF RECEIPTS AND EXPENDITURE FROM 1929
TO 1938
[18]
The estimates analysed above very quickly became out of date in
consequence principally of the Act of 8 April 1927, which increased
the contributions and improved the benefits, and also as a result of
the Act of 29 March 1928. A new table of annual estimates was
constructed for the period 1929-1938 giving effect to the provisions of
these two Acts. The contribution income, which had risen to 875.2
million RM. in 1927 and to 1,080 million RM. in 1928, was estimated
to be 1,140 million RM. in 1929, taking into account the introduction
of a new wage class as from 1 January 1928. The figure adopted for
1929 was maintained for each of the subsequent years. The sums
received as interest increase or decrease according as surpluses or
deficiencies augment or diminish the fund. Other items of receipts
include the grant of 40 million RM. obtained out of the Customs revenue
under the Act of 7 August 1925, until 31 March 1935 (consequently
only 10 million RM. for the year 1935), and an annual amount of
10 million RM. in respect of appreciation, miscellaneous profits and
receipts.
In order to obtain a figure for the emerging costs of benefits, the
estimated numbers of pensions in force (according to the figures obtained
in the course of calculations made for the first table of annual estimates *
were multiplied by the average amounts of benefit. For the invalidity
and old-age and widows' and widowers' pensions the' emerging cost
increases rapidly because both the nunúor of beneficiaries and the average
amount of pension increase at the same time. It was assumed that
the number of beneficiaries of orphans' pensions would remain practically
stationary. For, the cost of administration expenses the estimate
1
See above, p. 408.
429
GERMANY
showed an increase every second year in order to give effect to the
expected increase in the number of beneficiaries.
Finally, table XIII was constructed, which shows the probable
financial progress of the insurance scheme.
TABLE XIII.
PROBABLE FINANCIAL PROGRESS FROM 1 9 2 9 TO 1 9 3 8
(in millions of RM.)
Receipts
Expenditure
Con- Inter- Mistribu- est cella- Total
neous
tions
Op- Cost of
Bene- tional admi- Total
fits medical nistrabenefits tion
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
Surplus
(+)
Year
i
2
3
4
5
6
7
8
9
.
.
.
.
.
.
.
.
.
.
1,140
1,140
1,140
1,140
1,140
1,140
1,140
1,140
1,140
1,140
45
55
60
65
70
70
70
65
60
50
50
50
50
50
50
50
20
10
10
10
1,235
1,245
1,250
1,255
1,260
1,260
1.230
1,215
1,210
1,200
740
810
885
960
1,035
1,110
1,185
1,260
1,340
1,420
85
90
90
90
90
90
90
90
90
90
55
55
60
60
65
65
70
70
75
75
880
• 955
1,035
1,110
1,190
1,265
1,345
1,420
1,505
1,585
or
deficiency
(—)
10
+
+
+
+
+
—
—
—
—
—
355
290
215
145
70
5
115
205
295
385
§ 2 . — Annual Results of the Operation of the Scheme
The summary of the annual Profit and Loss Accounts reproduced
in table XIV sets forth the actual progress of the finances of the
insurance scheme, that is to say, the actual figures for the principal
items of receipt, exclusive of State aid, and expenditure and consequently the increase or decrease of the accumulated funds.
Part I of this monograph x contained an analysis of the system by
which the cost of benefits was divided since 1900 among the different
insurance institutions. This system was abolished by an Act of 23 June
1921 and since that Act came into operation the whole cost of benefits
(after deduction of the State aid) has been divided by the Reich Insurance
Office between the insurance institutions in proportion to the contributions collected by each during the financial year in question.
1
See p p . 387-388.
430
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
TABLE XIV. — FINANCIAL PROGRESS: EXPERIENCE
(in millions of RM)
Expenditure
Receipts
Surplus
Year
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
MiscellContributions Interest aneous
Total
Pensions
375.9 252.2
5.8
7.5
362.6
4.9
568.2. 386.1
550.0 13.3
775.5 525.0
659.6 19.9 96.0
875.2 29.6 95.7 1,000.5 601.8
1,075.9 54'.7 71.2 1,201.8 671.7
1,092.1 78.2 65.1 1,235.4 769.9
986.4 87.8 51.5 1,125.7 905.8
924.1 969.9
819.2 88.8 16.1
725.7 794.2
642.1 70.8 12.8
744.6 690.1
8.2
678.6 57.8
843.8 60.5 57.0 ! 961.3 674.4
945.4 66.0 8 35.9 1! 1,047.3 705.6
1,044.0 98.3 s 71.7 1,214.0 712.2
1,160.4 103.2 15.1 1,278.7 718.3
Op- Cost of
tional admi- Miscellmedical nistra- aneous
benefits tion
23.3
41.3
50.5
60.1
78.2
97.6
99.3
69.0
41.0
35.1
40.4
46.3
47.4
53.5
24.2
33.0
37.6
43.4
52.2
55.0
61.9
65.1
57.3
53.8
58.6
61.2
61.3
62.6
(+)
Total
or
deficiency '
(—)
300.2 + 75.7
0.5
465.8 +' 101.4
5.4
617.9 + 157.6
4.8
707.3 + 293.2
2.0
805.9 + 395.9 i
3.8
930.9 + 304.5
8.4
4.1 1,071.1 + 54.6
5.5 1,109.5 — 185.4
910.4 — 184.7
17.9
782.1 — 37.5
3.1
776.1 + 185.2
2.7
1.8 2 814.9 + 232.4
885.3 + 328.7
64.4
837.3 + 441.4
2.9 2
i Under this heading are included the payments from the unemployment insurance scheme to maintain
the benefit rights of unemployed persons, viz. a total of 52.9 in 1934, 18.0 in 1935, 15.2 in 1936 and 10.4 in
1937 (in-millions of RM.).
s In these figures are included depreciation of the assets as a result of the revaluation of properties and
furniture and fittings (50.9 million RM. in 1936; 0.7 million RM. in 1937).
s Including sums received from unemployment insurance to compensate the loss of interest' due to
the postponement of the transfer to the workers' insurance scheme of part of the unemployment insurance
contribution (25 million RM. In 1936; 13 million RM. in 1937).
§ 3. — Actuarial Balance-Sheets
The essential purpose of the investigations preparatory to the 1933
reform, to which reference has already been frequently made, was the
construction of an actuarial balance-sheet. With a view to justifying
the reform, which was then only in the form of draft proposals, it was
found necessary to construct several balance-sheets. The first referred
to the operation of the scheme under the legislation in force in 1931,
the second took account of the restrictions imposed by the emergency
decrees and, finally, the third dealt with the scheme as amended by
the provisions of t h e 1933 Bill, as they were applied as from 1 January
1934. Only the third balance-sheet, which relates to 1 January 1933J
will be considered here. This includes in fact three investigations ofthe financial position, corresponding with the three hypotheses, already
mentioned above, regarding the future permanent state of the economic
situation.
431
GERMANY
Under hypothesis (a), which takes the optimistic view, the rate of
Unemployment and the wages level experienced in 1929 were taken as
the standard, that is to say, a period of prosperity was assumed:
Under hypothesis (6), which takes the pessimistic view, recourse is
had to figures relating to the beginning of 1933, that is to say, to a
period of economic crisis.
Hypothesis (e), a compromise between these extremes, is based on
the 1929 unemployment rate, as in hypothesis (a), and the 1933 wages
level—as in hypothesis (b).
Moreover, under each hypothesis, calculations have in turn been
made at two rates ,of interest: 4 and 5 per cent.
Table XV sets forth the results obtained under each of the three
hypotheses and at the two rates of interest.
TABLE XV.
BALANCE-SHEET AS AT 1 JANUARY 1 9 3 3
(Interest at 5 and 4,per cent.)
LIABILITIES
ASSETS
Hypoth esis (a)
I. Contributions ¿ . .
II. Reich supplements .
III. Reich subsidies . .
IV.
Thousand
million RM.
5%
4%
24.4
29.8
5.7
7.2
4,0
5.0
1.2
1.2
Total . . .
35.3
0.6
I. Contributions . . .
II. Reich supplements .
III. Reich subsidies : .
13.4
'5.7
4.0
1.2
16.5
7.2
5.0
1.2
. Total . . .
Deficit . . . . . .
24.3
7.7
29.9
10.1
Contributions . . .
Reich supplements .
Reich subsidies . .
Reserves
20.2
5.7
4.0
1.2
Deficit
43.2
2.7
Thousand
million RM.
5%
4%.
I. Invalidity and oldage pensions . . .
Widows' pensions .
Orphans' pensions .
Other pensions i .ex-.
Administrative
penses and cost oí
voluntary insurance
Total . . .
II.
III.
IV.
V.
27.1
3.9
1.1
1.4
34.7
5.0
1.4
1.8
2.4
35.9
3.4
45.9
23.9
3.5
0.9
1.3
29.7
4.4
1.2
1.7
2.4
32.0
3.0
40.O
25.9
3.8
1.0
1.4
32.8
4.7
1.3
1.8
2.4
3.0
34.5
43.6
Hypoth esis (b)
?v.
i 1
I. Invalidity and oldage pensions . . .
II. Widows' pensions .
I I I . Orphans' pensions .
IV. Other pensions i . .
V. Administrative expenses and cost of
voluntary insurance
Total . . .
Hypoth esis (c)
I.
II.
III.
IV.
Total . . .
Deficit
31.1
3.4
24.8
7.2
5.0
1.2
38.2
5.4
I. Invalidity and oldage pensions . .
II. Widows' pensions .
I I I . Orphans' pensions .
IV. Other pensions i . .
V. Administrative expenses and cost of
voluntary insurance
Total . . .
i This item includes the fractions of pensions paid in arrears, payments in respect of
migrants and payments to insured persons in the Saar Territory.
432
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
These estimates led to the following conclusions. If the cost of
benefits borne by the insurance institutions were covered each year
by the contribution income (assessment system) the ratio of the total
contribution to the upper wage limit of each class, which was 5 per
cent, in 1933, should be gradually increased until it reached:
Under hypothesis (a)
Under hypothesis (b)
Under hypothesis (c)
5.1 in 1950,
7.5 in 1975 when the emerging cost of
benefits would be at its maximum.
8.6 in 1950,
8.8 in 1955, when the emerging cost of
benefits would be at its maximum.
6.0 in 1950,
7.5 in 1970, when the emerging cost of
benefits would be at its maximum.
If, on the other hand, it is assumed that as from the date of the
balance-sheet all insured persons are subject to the payment of a general
average premium, this should be determined as follows (as a percentage
of the upper limit in each wage class), according to the hypothesis and
rate of interest:
Hypothesis
(a)
(b)
(c)
Rate of interest
4 per cent. 5 per cent.
5.45
8.06
6.09
5.12
7.87
5.84
§ 4. — Consolidation of the Financial Position
(Act of 21 December 1937)
On the basis of the conclusions drawn from the actuarial balancesheets constructed as at 1 January 1933, and taking into account
the uncertainty regarding the possibility of obtaining an interest yield
of 4 per cent, and the fact that the new Act did not come into force
until one year after the date of the balance-sheet, and finally making
provision for a safety margin, the investigations preparatory to the
1933 Act allow for a rate of contribution permanently fixed at 6.5 per
cent, of the upper limit of each wage class. The immediate adoption
of this rate would, on the most probable estimates, obviate the necessity
for any later increase in the contributions and would enable financial
stability to be maintained on the basis not of an assessment system, as
was the case from 1924 onwards, but of an accumulation system with
general average premiums. The explanatory statement which preceded
the Act lays down that the necessary increase in contributions shall take
place only when the cost of unemployment insurance shall have decreased
by an equivalent amount.
Consequently, the reform undertaken in 1933 could not be carried
out before it became possible, in consequence of an improvement in
the position of the unemployment insurance scheme, to obtain from
the financial resources of thè latter scheme contributions for the benefit
of the workers' insurance scheme. In 1937 this condition was found
GERMANY
433
to be satisfied: the number of unemployed persons was greatly reduced
and, on the other hand, the resources of the unemployment insurance
scheme, which continued to receive 6.5 per cent, of wages, had increased
with the number of contributors and the level of wages. The time
had thus arrived for redistributing in a different manner the resources
of the various insurance schemes. However, the allocation of the total
deduction made from employees' wages among the different insurance
schemes was not altered; but it was laid down that the resources which
were available in the unemployment insurance scheme should be used
to make grants to the other schemes, and in particular to the workers'
insurance scheme.
Apart from minor amendments—already mentioned above—relating
to the Reich subsidies, the extension of the waiting period and the
introduction of a new wage class, the Act of 21 December 1937 includes
the two following clauses, which were essential for the consolidation
of the financial position.
GRANTS FROM THK UNEMPLOYMENT INSURANCE SCHEME
1
The unemployment insurance scheme must each year transfer to
the workers' insurance scheme an amount equal to 18 per cent, of the
total contributions received.by the latter. It has been estimated [46]
that this will produce a supplementary income of the order of 190 millions,
equivalent to an increase in the rate of contributions of 0.9 per cent.
of the upper limit of each wage class.
SUPPLEMENTARY PAYMENTS MADE BY THE REICH GOVERNMENT
It has already been mentioned that the supplementary income
required to establish financial solvency on the basis of an accumulation
system with general average premiums was estimated to correspond to
an increase in the rate of contributions of 1.5 per cent, of the upper
limit of each wage class. Since the transfer from the unemployment
insurance scheme is equivalent to only 0.9 per cent., there had still
to be found an item of income corresponding to about 0.6 per cent.
of wages 2. The liabilities thus remaining uncovered were made chargeable to the Reich, which must pay the interest on the amount concerned
and eventually undertake its gradual redemption, in accordance with
regulations to be made by the Minister of Labour in agreement with
the Minister of Finance.
1
These grants have been referred to in Chapter II, § 3, under the heading
of 2" Other Receipts ", p. 417.
In addition, the workers' insurance scheme is compelled to make to the
miners' insurance scheme an annual grant of 50 million RM. (see p. 426)
which decreases the grant which it receives from the unemployment insurance
scheme and increases pro tanto the burden falling on the Reich.
28
CHAPTER IV
FINANCIAL ADMINISTRATION
§ 1. — Investment of Funds. — Statutory Provisions
and Regulations
The Social Insurance Code lays down first that the fund shall be
invested at interest and as far as possible in such a way as to maintain
a stable value. It then gives a restrictive list of the authorised classes
of investment for social insurance funds, with the proviso that the
Minister of Labour may authorise other investments, subject to revocation. Certain investments are placed under special regulations to
which reference will be made as and when they occur in the course
of the list given below.
AUTHORISED CLASSES OF INVESTMENT. — PROVISIONS PECULIAR TO
CERTAIN CLASSES
(1) Bonds issued by the Reich or a State or by a Reich or State
credit institution, and loans entered in the public debt register of the
Reich or of a State.
The Reich Government fixes the amount up to which this class
must be included among the investments. This amount may not be
fixed at such a figure that it exceeds one-quarter of the total fund:
in fact this maximum proportion was the figure adopted in 1923.
Until this proportion is attained the insurance institution must each
year invest in this class an amount equal to at least 10 per cent, of
the increase in the value of its fund.
As from 1 January 1938, under the Order of 14 April 1938-1, the
securities which must compulsorily appear among the investments of
insurance institutions include only bonds issued by the Reich and
loans entered in the public debt register of the Reich. Until these
securities account for at least one-half of the fund, there must be
allocated to them each year at least three-quarters of the increase in
the value of the fund.
• (2) Bonds, the interest on which is guaranteed by the Reich or a
State or by a Reich or State credit institution.
(3) Loans, the security for which is a safe mortgage on a parcel of
land in Germany; safe trusts on real estate or annuity bonds on parcels
of land in Germany.
1
See ReichsGesetzblatt I, No. 58, 21 April 1938, or Industrial and Labour
Information, Vol. LXVI, No. 13, 27 June 1938.
GERMANY
435
The legislative text makes the following provisions:
(i) a mortgage, a trust on real estate, or an annuity bond may be
deemed to be safe if the loan does not exceed two-thirds of
the value of the parcel of land;
(ii) as a rule the loan must be made on a first mortgage;
(iii) the value of the parcel of land assumed for the purpose of the
loan shall not exceed the ordinary value ascertained by careful
investigation; in determining this value there shall be taken
into account only the permanent qualities of the parcel of land
and the income which it can yield permanently to any owner
under suitable administration;
(iv) loans shall not be made on building plots or on new buildings
which are not completed and not yet capable of yielding
income, nor. on parcels of lands which are not capable of
yielding a permanent income, such as pits, quarries and mines,;
the Minister of Labour may authorise exceptions in particular
cases.
(4) Securities, especially mortgage deeds, and bonds of all kinds
issued by German public bodies or by credit institutions belonging to
such bodies, provided that the said securities or bonds have been
approved by the Government as suitable for the investment of trust
funds.
(5) Securities by the State laws (appropriate to the institution to
which the fund belongs) for the investment of trust funds.
(6) Bearer mortgage deeds issued by the German mortgage banks, on
which the Reichsbank makes loans in class I.
These mortgage deeds are specified each year by the Reichsbank.
(7) In bonds on securities or mortgages in which investment is
permitted under Nos. (1) to (5) above in accordance with the rules
of the Reich Loan Fund or the Reichsbank.
(8) Deposits in a public savings bank which is declared by the
competent authority of the State in which its head office is situated
to be suitable for the investment of trust funds.
(9) Deposits in the Reichsbank, a State bank or any other German
bank declared by law to be suitable for the purpose.
(10) Bonds of German public bodies, and of school districts and
ecclesiastical parishes, provided that these bonds can be called in by
the creditor or that provision is made for their regular amortisation.
(11) Bonds for which a public body covered by No. (4) above or
a credit institution belonging to such a body, or a public savings' bank
of the kind mentioned under No. (8), or a bank mentioned under
No. (9), is security on its own account. .
(12) Short-term loans under bond for which sufficient security is
given.
Investments in the last two classes must be approved by the Reich
Insurance Office.
The Reich Minister of Labour may make general regulations concerning these investments and in particular may fix a maximum amount
for their total aggregate.
Available funds may also be used to purchase land in Germany,
in loans for public utility purposes or in shares in undertakings for such
purposes. Public utility undertakings are deemed to include cooperative societies and their federations, the operations of which
436
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
according to their rules are carried on exclusively or mainly for the
benefit of persons insured under the invalidity insurance and the salaried
employees1 insurance schemes. Purchase of land at a price higher
than that fixed by the Minister of Labour and the construction of
buildings at a cost in excess of that fixed by the Minister of Labour
require special approval.
§ 2. — Statistics of Investments
• COMPOSITION OF THE FUND
Every year a detailed description of the fund is published [22]: the
analysis given below shows the amounts in each of the principal classes
of investment as at 31 December 1937.
COMPOSITION OF THE FUND AS AT 3 1 DECEMBER 1 9 3 7 *
(in thousands of RM.)
Cash in hand (including balances at the bank
and in post office cheque accounts) . . .
Securities (at purchase price):
I. Public loans:
To the Reich
/
To States
To communes and provinces . . . .
II. Other securities:
Loans to a Reich or State credit instiMortgage deeds
Communal mortgage bank bonds . .
Other miscellaneous securities . . .
Loans (amounts actually advanced) :
I. Secured loans:
To the States
To provinces and communes . . . .
To other public bodies
To public utility undertakings or cooperative societies for building houses
To private persons .
II. Mortgages, loans and annuity bonds on
real estate:
Mortgages on
Land for working-class dwellings .
Miscellaneous real estate
III. Balances in savings banks.
IV. Shares in public utility undertakings,
170,438
841,358
82,698
42,263
98,630
636
268,842
84,205
79,523
27,088
103,854
60,278
7,032
8,149
1,236
4,536
284,761
46,575
82,940
5,770
5,346
Real estate (hnnlc vaìiieì
F urnit
Total
1,498,155
637,565
123,899
14,210
2,444,267
i At the same date the debts of the insurance institutions, amounting to 4,957 thousand
RM., reduced the total value of the fund to 2,439,310 thousand RM.
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438
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
INTEREST YIELD
The following figures show year by year the rate of interest yielded
in total by the invested funds:
Year
1927
1928
1929
1930
1931
1932
Rate per cent.
4.2
5.5
5.9
5.8
6.1
5.4
Year
Rate per cent.
1933 . . . . . . .
4.9
1934
4.8
1935
4.4
1936
4.2
1937
4.2
§ 3. — Statistics. — Actuarial and Financial Control
STATISTICS
The insurance institutions draw up statistical schedules relating to
their experience and send them each year to the Reich Insurance Office, in
accordance with instructions sent to them. This central,Office collates
the statistics and publishes each year in its report [22] data referring
to the preceding financial year. 3
Apart from these statistics drawn up periodically, special enquiries
are occasionally made. This study will be confined to a brief summary }
of the methods used since 1934 by the territorial institutions and by
the special schemes for determining the total insured population and
its age distribution 2.
In the territorial institutions the collection of Contributions is made
by means of stamps affixed to insurance cards supplied to insured
persons. Each of these cards, on which 52 stamps may be fixed, must
be exchanged within two years of the date of issue. To keep an account
of all the cards returned to the institutions after exchange would have
entailed lengthy and costly administrative operations which, moreover,
would not have provided very accurate data, since no account could
be taken of (i) insured persons who left the insurance scheme since
the date of exchange of cards and before the date of the enquiry and
(ii) insured persons who had not yet exchanged the card given to them
on their entry into insurance.
It seemed preferable, therefore, to adopt an indirect method based
on the following principle:
Each institution submits a return of the number of contributionstamps sold in its district during the specified, period of observation.
This number, which is known to be exact within a relatively small
margin of error, is taken to be the same as that of the stamps affixed
to the cards during the same period; From an analysis of a sample
of about one-third of the cards returned to the institutions the mean
1
For a more detailed study of this, see the original document [21] or an
analysis of it which appeared in the International Labour Review, Vol. XXXII,
No.2 4, October 1935 [44].
The first results of these enquiries, published in 1935, are referred to
and reproduced in part in Chapter I, § 2, p. 407.
GERMANY
439
number of weekly contributions per insured person during the period
of observation is calculated. The number, of insured persons is obtained
by dividing the figure representing the total of weekly stamps by the
calculated average number of weekly contributions per insured person.
The insured population obtained in this manner cannot be related
to a fixed date but only to the whole of the period of observation,
which in the early investigations was limited to the year 1933. The
number calculated by this method may also be defined as the probable
.number of insured persons who purchased the contribution-stamps
sold in the district covered by the territorial institution, on the assumption that each person buys a number of stamps equal to the average
number of weekly contributions calculated per insured person.
The special institutions usually issue a perforated card in the name
of each of their insured members. Consequently the number of insured
persons and their distribution by sex and year of birth have been
ascertained directly; each institution had only to compute the perforated
cards made out.
ACTUARIAL AND FINANCIAL CONTROL
Workers' insurance institutions are placed under the control of the
Reich Insurance Office. The latter may at any time inspect the accounts
of any one of the institutions. The institutions must produce to the
Office on demand all books, vouchers, documents, records and certificates
in their custody, and in general give all information required for the
purpose of exercising control. The draft of the annual budget must
be submitted to the central Office at least two weeks before the date
of its coming into operation. The Office may make amendments to
this draft when it is inconsistent with statutory provisions or when it
is likely to threaten the solvency of the institution.
In addition, in order to exercise control over the financial progress
and in particular to verify that the scale of contributions is fixed at
its appropriate level, the Minister of Labour must have an actuarial
balance-sheet drawn up every four years; the first of these balancesheets relates to 31 December 1936.
BIBLIOGRAPHY
1.
2.
3.
4.
5.
6.
I. — Legislative Texts
Notification of the new text of the Federal Insurance Code. Dated
15 December 1924. — Legislative Series, 1924, Ger. 10.
Act to amend the calculation of pensions under the invalidity insurance
system. Dated 23 March 1924. — Legislative Series, 1925, Ger. 4.
Act respecting the development of the salaried employees' and invalidity
insurance systems and respecting health measures under the Reich
insurance system. Dated 28 July 1925. — Legislative Series, 1935,
Ger. 6.
Act to amend the Reich Insurance Code and the Salaried Employees'
Insurance Act. Dated 25 June 1926. — Legislative Series, 1926, Ger. 4.
Act respecting benefits and contributions under the invalidity insurance
system. Dated 8 April 1927. — Legislative Series, 1927, Ger. 3.
Act respecting benefits under the invalidity and salaried employees'
insurance systems. Dated 29 March 1928. — Legislative Series, 1928,
Ger. 3.
440
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
7.
Act respecting benefits under the invalidity insurance system. Dated
12 July 1929. — Legislative Series, 1929, Ger. 4.
8. Fourth Order of the President of the Reich to make provision for ensuring
economic and financial stability and the maintenance of internal order.
Dated 8 December 1931. — Legislative Series, 1931, Ger. 9.
9. Order of the President of the Reich respecting measures for the maintenance of unemployment relief and social insurance and for the
lightening of the burden of public welfare expenses of the communes.
Dated 14 June 1932. — Legislative Series, 1932, Ger. 4.
10. Order to supplement public benefits. Dated 19 October 1932. — Legislative Series, 1932, Ger. 9.
11. Act to maintain the solvency of the invalidity insurance, salaried employees' insurance and miners' insurance systems. Dated 7 December
1933. — Legislative Series, 1933, Ger. 12.
12. Order respecting the amendment, re-issue and administration of certain
provisions of the Reich Insurance Code, the Salaried Employees'
Insurance Act and the Federal Miners' Benefit Societies Act. Dated
17 May 1934. — Legislative Series, 1934, Ger. 9.
13. Act respecting the development of the social insurance system. Dated
5 July 1934. — Legislative Series, 1936, Ger. 10.
14. Verordnungen (1 bis IS) zum Aufbau der Sozialversicherung (see source
quoted below under 47).
15. Ninth Order for the development of the social insurance system. Dated
6 August 1935. — Legislative Series, 1935, Ger. 9 (D).
16. " Gesetz über den Ausbau der Rentenversicherung vom 21. Dezember
1937." Amtliche Nachrichten für Reichsversicherung, 1937, No. 12.
II. — Parliamentary and Administrative Documents
17.
18.
19.
20.
21.
22.
" Eine versicherungstechnische Bilanz behufs Nachprüfung der Beiträge
zur Invalidenversicherung." Amtliche Nachrichten des Reichsversicherungsamts, 1927, No. 4.
" Denkschrift über Leistungen und Beiträge in der Invaliden- und
Angestelltenversicherung."
Drucksachen des Reichstags, IV. Wahlperiode, No. 741, 1928.
" Gesetz zur Erhaltung der Leistungsfähigkeit der Invaliden-, der
Angestellten- und der knappschaftlichen Versicherung vom 7. Dezember
1933.
Begründung." Anlage zum Reichsarbeitsblatt, 1933, No. 36,
Partie IV.
" Versicherungsmathematische Denkschrift für die finanzielle Lage und
künftige Entwicklung der Invalidenversicherung und die geldlichen
Auswirkungen des Gesetzes." Anlage zum Reichsarbeitsblatt, 1933,
No. 36, Partie IV.
" Die Versicherten der Invalidenversicherung, Anzahl, Geschlechts- und
Altersgliederung." Amtliche Nachrichten für Reichsversicherung, 1935,
No. 4.
" Jahresbericht des Reichsversicherungsamts." Amtliche Nachrichten des
Reichsversicherungsamts, 1924-1927; Amtliche Nachrichten für Reichsversicherung, 1928 and following years.
III. — Articles
23.
24.
25.
DOBBERNACK: " Der finanzielle Stand der deutschen Sozialversicherung
vor und nach dem Weltkriege." Zeitschrift für die gesamte Versicherungswissenschaft, Band 28, 1928, p. 58.
AURIN : " Wandlungen in der sozialen Rentenversicherung." Zeitschrift
für die gesamte Versicherungstvissenschajt, Band 28, 1928, p. 233.
HEINZE: " D i e schwierige Lage der Invalidenversicherung und ihre
Gründe." Die Reichsversicherung, 1931, p. 4.
GERMANY
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
441
DOBBERNACK und SATJERBORN: " Entwicklung und Stand der deutschen
Sozialversicherung," Die Reichsversicherung, 1932, p. 33.
FROMMHOLD: " D e r Leidensweg der Invalidenversicherung." Deutsche
Invalidenversicherung, 1932, p. 116.
——: " Ein Rückblick und ein Ausblick, Aufbau oder Umbruch der
Sozialversicherung." Deutsche Invalidenversicherung, 1932, p. 146.
HEINZE: " Die Sozialversicherung 1924 bis 1931 in Zahlen." Die Reichsversicherung, 1932, p. 139.
DOBBERNACK: " Die finanzielle Lage der Invaliden-, der Angestelltenund der knappschaftlichen Pensionsversicherung unter Berücksichtigung der Notverordnung." Die Reichsversicherung, 1932, H. 6, p. 160.
——: " Die Finanzlage der deutschen sozialen Rentenversicherungen."
Zeitschrift für die gesamte Versicherungswissenschaft, 1933, p. 275.
und SAUERBORN: " Entwicklung und Stand der deutschen Sozialversicherung." Die Reichsversicherung, 1933, H. 2/3, p. 33.
: " Entwicklung und Stand der Sozialversicherungsfinanzen unter
besonderer Berücksichtigung der Rentenversicherungen."
Reichsarbeitsblatt, Teil IV, 1933, p. 254.
HEINZE: "Drei Grundforderungen zum Neuaufbau der Invalidenversicherung." Die Reichsversicherung, 1933, p. 81.
'-:
" Grundsätzliches zur Neuordnung der Invalidenversicherung."
Deutsche Invalidenversicherung, 1933, No. 6, p. 87.
: " Bilanzen in der Rentenversicherung der deutschen Arbeiter."
Zentralblatt für Reichsversicherung und Reichsversorgung, 1933, No. 23,
p. 358.
und STREBEL: "Ausbau der Statistik in der deutschen Invalidenversicherung." Die Reichsversicherung, 1933, p. 341.
DOBBERNACK: "Die deutschen Sozialversicherungsfinanzen."
Annales
d'Economie Commerciale, 1934, H. 2, p. 141.
: " Die Sanierung der deutschen sozialen Rentenversicherungen."
Zeitschrift für die gesamte Versicherungswissenschaft, 1934, p. 1.
HEINZE : " Ausbau der statistischen Grundlagen in der deutschen Invalidenversicherung." Reichsarbeitsblatt, Part IV, 1934, p. 388, and 1935,
p. 235.
: " Grundsätzliches zur Anlagepolitik der neuen Invalidenversicherung." Die Reichsversicherung, 1935, H. Î, p. 23.
" The Reform of Workers' Compulsory Pension Insurance in Germany."
International Labour Review, Vol. XXXI, Nos. 3-4: March 1935,
pp. 398-418; April 1935, pp. 539-554.
HEINZE : " Der versicherungstechnische Neubau der deutschen Invalidenversicherung." Die Reichsversicherung, 1935, p. 117.
" Statistics of Persons insured under Workers' Compulsory Pension
Insurance in Germany." International Labour Review, Vol. XXXII,
No. 4, October 1935, pp. 515-522.
DOBBERNACK: " Überblick über Inhalt und Bedeutung des Gesetzes über
den Ausbau der Rentenversicherung." Deutsche Invalidenversicherung,
1938, No. 1, p. 3.
IV. — Rooks
46.
47.
DOBBERNACK: Die Rettung der Rentenversicherung.
Kohlhammer,
Stuttgart-Berlin, 1934.
Reichsversicherungsordnung nebst Einführungsgesetz,
Ergänzungsbestimmungen und Ausführungsvorschriften.
Herausgegeben von Dr. Franz
Eichelsbacher. C. H. Beck'sche Verlagsbuchhandlung. Munich and
Berlin, 1938.
GREAT RRITAIN
AND NORTHERN IRELAND
National Health Insurance and Contributory
Pensions Scheme
CONTENTS
Page
INTRODUCTION
447
Part I
NATIONAL HEALTH INSURANCE
CHAPTER I: Demographic Estimates, Bases, and Experience
1. Biometrie Tables
Mortality Rates
'Sickness and Disablement Rates .
Marriage and Widowhood Rates
Issue Rates
2. Insured Population
Preparatory Estimates
Experience of Operation of Scheme
449
449
451
452
454
457
457
458
• • •
CHAPTER I I : Financial Estimates, Bases, and Experience
1.
2.
3.
4.
449
. . . . .
,Contributions
State Grants
Total Income
Benefits and Administration Expenses
Qualifying Conditions
Maintenance of Rights of Persons who are in Arrears
Arrears due to Unemployment
Medical Benefit
Administration Expenses
CHAPTER I I I : Financial
System
1. Financial System
Basic Premium
Reserve Values and Transfer Values
Initial Liability
, Redemption of Outstanding Reserve Values
. . .
461
461
462
462
463
464
464
465
465
465
467
467
467
468
468
• 469
444
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
Page
CHAPTER I I I : Financial Scheme (continued)
2. Financial Organisation . . •
Reserve Values (Apportionment) Account
Reserve Suspense Fund
Contingencies Funds
Central Fund .
Unemployment Arrears Fund
Apportionment of Contributions
3. Actuarial Balance-Sheets
. .
CHAPTER IV: Financial Administration
1. Investment of Funds
Investment of Funds standing in the Investment Account .
Investment of Sums paid over to Societies and Investments
by the Minister of Health on behalf of Societies . . . . .
2. Valuation of Investments
3. Interest Rates
4. Actuarial Valuations
BIBLIOGRAPHY
469
470
470
471
471
472
473
473
476
476
476
477
478
479
480
483
I. Legislative and Administrative Texts
II. Reports and Memoranda
III. Books and Articles
IV. Reports on Operation of Scheme
483
484
485
486
INDEX OF TABLES
L
II.
III.
Life Table 1920-1921 (England and Wales)
Morbidity and Invalidity Tables . . .
Probabilities of Marriage for Women and Probabilities of
becoming a Widow
IV. Probability of Issue to a Member during One Year
V. (a) Age-Distribution of Entrants into and Exitants from
National Health Insurance. (¿>) Age-Distribution of the Insured
Population of Great Britain and Northern Ireland (exclusive
of Deposit Contributors) at 1922-1923 . . '
VI. Age Distribution per Thousand Members of Approved Societies
as at 31 December 1931
VII. Number of Insured Persons: Experience
VIII. Receipts
IX. Expenditure
X. Central Fund . . .
XI. Apportionment of Weekly Contribution
XII. Summaries of Valuations Balance-Sheets . ..
XIII. Investments of Approved Societies at the Valuation Dates.
XIV. Total Accumulated Funds at 31 December each Year . . . .
450
453
455
456
458
459
459
463
466
472
473
474
478
479
GREAT BRITAIN AND NORTHERN IRELAND
445
Part II
WIDOWS', ORPHANS', AND OLD-AGE CONTRIBUTORY
PENSIONS
Page
CHAPTER I: Demographic Estimates, Bases, and Experience . . . .
487
1. Biometrie Tables
Mortality Tables
Tables showing Marital Condition
Tables showing Composition of Family
2. Insured Population
Original Estimates
Estimates of 1935
Experience
487
487
488
491
.
3. Annual Numbers of Beneficiaries
496
CHAPTER I I : Financial Estimates, Bases, and Experience
1.
2.
3.
4.
5.
Contributions
State Grants
Total Income
Benefits
Sundry and Total Expenditure
497
.
•CHAPTER I I I : Financial System
1. Preparatory Studies
Theoretical Premiums and Gradual Rise in
Rates
Table of Annual Estimates
State Charges
Preliminary Estimate of Assets and Liabilities
2. Subsequent Estimates and Review
1929 Estimates
First Decennial Review
3. Experience
CHAPTER IV: Financial Administration
1. Temporary Balance
2. Investment of Funds
3. Accounting, Actuarial Reports, Statistics
493
493
494
495
497
499
500
500
502
504
504
Contribution
504
505
506
507
508
508
508
511
512.
512
512
512
BIBLIOGRAPHY
514
I.
II.
III.
514
515
515
Legislation
Reports and Memoranda
Experience
446
ACTUARIAL TECHNIQUE AND
INDEX
FINANCIAL ORGANISATION
OF T A B L E S
Page
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
XII.
XIII.
XIV.
XV.
XVI.
XVII.
XVIII.
XIX.
XX.
XXI.
XXII.
Rates of Mortality
488
Proportions of Persons Single, Married and Widowed used in
the Calculations for the First Decennial Review, 1935 . .
489
"Percentage Age Distributions of Wives under Age 70 for Various
Ages of Husbands
489
Rates of Remarriage of Widows
490
Number of Children under Age 14 left by 1,000 Married Men •
and Widowers dying at the Ages shown
491
Number and Ages of Children left by Insured Males . . . .
492
Estimated Number of Insured Persons aged 16-65 in Certain
Future Years
494
Percentage of Population in National Health and (latterly)
Pensions Insurance
495
Number of Insured Persons : Experience
495
Numbers of Beneficiaries at 31 December in each Year from
1926 to 1936
, .
496
Estimated Cost of Old-Age Pensions to Persons over Age 70
499
Income for the Period 4 January 1926 to 31 March 1937 . . .
501
Expenditure for the Period 4 January 1926 to 31 March 1937.
503
Estimate of the Exchequer Charge under the Widows', Orphans'
and Old-Age Contributory Pensions Act, 1925
505
Aggregation of Exchequer Charges in Respect of Pensions
506
Aggregation of .State Grants actually Paid in respect of Pensions
507
Present Values at Beginning of 1926 of Assets and Liabilities
508
Receipts and Payments, and Balances in the Treasury Pensions Account during the Period from 1 April 1929 to 31
March 1946 as Estimated for the Bill of 1929
509
Estimate of Expenditure on Benefits and Income from'Contributions and Exchequer Grants in each Financial Year from
1934-35 to 1965-66
510
Actuarial Balance-Sheet: Present Values of Assets and Liabilities at 3y 3 per cent, per annum
511
Actual Balances in Pensions Accounts
511
Investment of Funds in Treasury Pensions Account . . .
513
INTRODUCTION
Compulsory insurance in the United Kingdom of Great Britain and
Northern Ireland is dealt with below in two separate studies. The first
studies the financial organisation of the scheme of insurance against
sickness and disablement (National Health Insurance) 1 , a distinction
between these two risks being unnecessary on account of the definition
adopted for disablement, which is regarded as a continuance of sickness.
The second deals with the financial organisation of the scheme combining
widows' and orphans' insurance and old-age insurance (Contributory
Pensions).
The national health insurance scheme and the widows', orphans' and
old-age contributory pensions scheme are very much the same in scope,
and the contributions are collected jointly. In all other respects the
two schemes are clearly distinct. National Health Insurance is administered chiefly by (1) approved societies, i.e. insurance institutions which
satisfy the conditions laid down by the Act for health insurance carriers
and have been approved as such by the administrative authorities,
and (2)' insurance committees2 for administering medical benefit to
members of approved societies and all benefits to insured persons
who are not members of such societies. Approved societies and
insurance committees are both subject to the supervision and authority
of a Central Government department, as will be shown later. The
contributory pensions scheme, on the other hand, is administered directly,
as described in the second study, by central departments. From the
financial point of view, too, it is essential to distinguish between the
two schemes, which in this respect are completely independent and are
based upon different technical principles.
The National Insurance Act of 1911 introduced a compulsory scheme
of insurance against sickness and disablement in Great Britain and
Ireland on the same date — 15 July 1912. The scheme was divided
into two separate parts in 1922, after the promulgation of the measures
establishing the Irish Free State. The scheme discussed below is that
in force in Great Britain (England, Wales, and Scotland) and the whole
of Ireland up to 1922, and in the United Kingdom of Great Britain and
Northern Ireland from 1923 onwards. Any provisions special to Northern
Ireland are left out of account, and in many cases the statistics given
refer to Great Britain alone.
The principal events in the development of the health insurance
scheme may be briefly recapitulated. On 15 July 1912 the existing
1
Maternity benefit is also provided under the health insurance scheme,
but is left out of account here whenever possible, since it does not belong to,the
scope
of the present volume.
2
Except in Northern Ireland, where the Ministry of Labour performs the
work entrusted in Great Britain to the insurance committees.
448
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
companies and societies, such as the friendly societies which administered
insurance privately, were brought into the compulsory insurance scheme,
which met with few difficulties in application. Following the abnormal
period 1914-1918, contributions and benefits were found to be no longer
in line with the level to which the cost of living had risen. The rates of
both were accordingly raised, from 5 July 1920, by the National Health
Insurance Act, 1920. The introduction of widows', orphans' and oid-age
pensions lightened the burden on the health insurance scheme by substituting an old-age pension between the ages of 65 and 70 for the sickness and
disablement benefit previously payable between these ages; contributions
in respect of the latter scheme were consequently reduced, from 4 January 1926, by the Widows', Orphans' and Old-Age Contributory Pensions
Act, 1925, and were made to terminate at the age of 65 instead of 70.
Finally, since 1930 a series of measures have been adopted to deal with
the special circumstances arising out of the economic depression, and,
in particular, to protect the rights of unemployed insured persons. All
previous legislation has been consolidated under the National Health
Insurance Act of 1936 1.
The widows', orphans' and old-age insurance scheme introduced in
Great Britain by the 1925 Act supplemented rather than replaced the
non-contributory old-age pension system in force under the Acts of
1908 and 1924. Legislation to provide simular benefits was also passed by
Northern Ireland. Since the scheme at present in operation in Northern
Ireland is completely independent, and since the principal technical
studies on the subject were made solely with reference to Great Britain,
the present study of the contributory pensions scheme is limited to
the latter country.
Leaving out of account minor changes, three principal stages may be
distinguished in the evolution of widows', orphans' and old-age insurance.
During the first of these stages the 1925 Act came into operation ; this was
effected in several steps: on 4 January 1926 the collection of contributions and the payment of widows' and orphans' pensions began; on
2 July 1926, the payment of old-age pensions to persons over 70 years;
and finally on 2 January 1928, the payment of old-age pensions to persons
between 65 and 70 years of age. The second stage was marked by the
Act of 1929, which extended the scope of non-contributory pensions
to widows (in particular, the age for the grant of such pensions was
lowered to 55) as from 1 January 1931, in some cases, 1 July 1930. In
the third stage, beginning in 1930, special measures have been introduced
with a view to mitigating the effects of the economic depression. All
previous legislation has been consolidated under the Widows', Orphans,
and Old-Age Contributory Pensions Act of 1936 2.
1
2
See Bibliography, Part I, No. 13.
See Bibliography, Part II, No. 6.
PART
I
NATIONAL HEALTH INSURANCE
CHAPTER I
DEMOGRAPHIC ESTIMATES, BASES AND EXPERIENCE
§ 1. — Biometrie Tables
MORTALITY RATES
The mortality rates of the English Life Table No. 6 (1891-1901) were
used in connection with the preparatory work when the National Health
Insurance scheme was being formulated, but soon after the Actuarial
Advisory Committee appointed in 1912 observed in its first report [22]
that these rates were obsolete and should be altered to allow for recent
and continual fall in the death rate.
The number of deaths for decennial age-groups was obtained from
the registration returns for England and Wales for the three years
1908-1910. The population at the central date of this period, i.e.
30 June 1909, was estimated, use being made of the 1901 census figures.
Since the results of the 1911 census were not yet known, the population
on 31 March 1911 was calculated on the assumption that the net migration and mortality rates between'1901 and 1911 were the same as
those experienced between 1891 and 1901, i.e. that:
Population aged x to x + 10 in 1911
Population aged x — 10 to a; in 1901
Population aged x to x + 10 in 1901
Population aged x — 10 to a; in 1891
The population at 30 June 1909 was then obtained by arithmetical
interpolation [20, 22].
The Royal Commission on National Health Insurance of 1924, and
in particular the Departmental Actuarial Committee which was
instructed to assist it in technical matters, noted that the death rate
had fallen substantially since the period 1908-1910: It concluded [33]
that the mortality rates prepared by the 1912 Actuarial Committee
must be replaced by those which had been compiled for the preparatory
work [32] on the contributory pensions scheme, which had the advantage
of being based on the most recent statistics available (for England and
Wales), namely the 1921 census returns and the registered deaths in
29
450
ACTUARIAL T E C H N I Q U E AND FINANCIAL ORGANISATION
the two years 1920 and 1921. This table, which has been used ever since,
is reproduced below:
TABLE I.
LIFE TABLE 1 9 2 0 - 1 9 2 1 (ENGLAND AND WALES)
Probability that a person of an exact age will survive one year
Age
Men
Women
Age
Men
Women
16 years. .
17 » . .
18 » . .
19 » . .
0.99749
0.99728
0.99706
0.99685
0.99744
0.99730
0.99718
0.99708
60 years. .
61 » . .
62 » . .
63 » . .
64 » . .
0.97447
0.97238
0.97009
0.96757
0.96478
0.98133
0.97979
0.97808
0.97617
0.97403
20
21
22
23
24
»
»
»
»
»
..
..
..
..
..
0.99666
0.99650
0.99637
0.99626
0.99616
0.99699
0.99690
0.99680
0.99669
0.99657
65
66
67
68
69 •
»
»
»
"
»
0.96168
0.95824
0.95443
0.95023
0.94562
0.97162
0.96889
0.96578
0.96228
0.95840
25
26
27
28
29
»
»
»
»
»
..
..
..
..
..
0.99605
0.99593
0.99581
0.99569
0.99556
0.99646
0.99636
0.99627
0.99619
0.99612
70
71
72
73
74
» ..
» ..
" ..
» ..
»• ..
0.94058
0.93509
0.92912
0.92261
0.91545
0.95416
0.94958
0.94466
0.93933
0.93349
30
31
32
33
34
>»
»
"
»
»
..
..
..
..
..
0.99543
0.99528
0.99511
0.99491
0.99469
0.99605
75
0.99597
76
0.99587
77
0.99575
78
0.99562 . 7 9
»
»
»
»
»
..
..
..
..
..
0.90751
0.89900
0.89010
0.88080
0.87120
0.92700
0.91974
0.91165
0.90285
0.89340
35
36
37
38
39
»
»
»
»
»
..
..
..
..
..
0.99445
0.99420
0.99395
0.99369
0.99343
0.99549
0.99535
0.99520
0.99504
0.99487
80
81
82
83
84
»
"
»
»
»
..
..
..
..
..
0.86130
0.85110
0.84050
0.82930
0.81730
0.88330
0.87280
0.86210
0.85130
0.84040
40
41
42
43
44
»
»
»
»
"
..
..
..
..
..
0.99316
0.99286
0.99253
0.99216
0.99174
0.99468
0.99446
0.99421
0.99393
0.99362
85
86
87
88
89
»
"
»
»
»
..
..
..
..
..
0.80430
0.79040
0.77570
0.76050
0.74570
0.82930
0.81790
0.80610
0.79380
0.78080
45
46
47
48
49
»
»
»
»
»
..
..
..
..
..
0.99127
0.99075
0.99018
0.98955
0.98885
0.99328
0.99291
0.99251
0.99207
0.99158
90
91
92
93
94
"
»
»
»
»
..
..
..
..
..
•0.73100
0.71800
0.70700
0.69800
0.69100
0.76700
0.75200
0.73600
0.71900
0.70400
50
51
52
53
54
"
»
»
»
»
..
..
..
..
0.98808
0.98723
0.98628
0.98522
0.98405
0.99103
0.99042
0.98975
0.98901
0.98819
95
96
97
98
99
» ..
» ..
» ..
» ..
» ..
0.68600
0.67700
0.66200
0.64100
0.61100
0.69100
0.68000
0.67100
0.65900
0.64100
55
56
57
58
59
»
»
»
»
»
..
..
..
..
..
0.98276
0.98135
0.97982
0.97817
0.97639
0.98728
0.98628
0.98519
0.98401
0.98273
100
101
102
103
»
"
»
»
0.56000
0.50000
0.40000
0.61400
0.57500
0.52000
0.43200
..
..
..
..
..
..
..
..
..
—
GREAT BRITAIN AND NORTHERN
IRELAND
451
SICKNESS AND DISABLEMENT RATES
The Act defines sickness and disablement as incapacity for work
caused " by some specific disease or bodily or mental disablement ".
Sickness benefit is granted from the fourth day of incapacity and continues for a period or periods not exceeding 26 weeks in all. For the
purpose of calculating this period of 26 weeks, detached periods of
incapacity separated by intervals of less than 12 months are linked
together and treated as if they formed a single illness. Benefit
granted
after the expiry of 26 weeks is termed disablement benefit 1 . It follows
from the linking together just mentioned that in any twelve months an
insured person who has once received disablement benefit cannot, in
the case of repeated incapacity, receive sickness benefit, but only further
disablement benefit.
In order to obtain data on sickness and disablement for the purposes
of compulsory social insurance, reference was made to the returns of a
friendly society—the Independent Order of Oddfellows, Manchester
Unity Friendly Society—which had made an investigation covering the
years 1893-1897. Figures were taken from the results of the investigation, showing for each occupational group the average number of weeks
of sickness per member and per annum, classified by age and the length
of the period of sickness (under or over 26 weeks). The figures relating
to periods of sickness up to 26 weeks were taken as sickness rates,
and those
relating to periods after the first 26 weeks as disablement
rates 2. Before these rates were adopted for the purpose of compulsory
insurance they were critically examined on the following grounds. The
occupational distribution of the members of the Manchester Unity was
not representative of that of the persons to be insured under the proposed
compulsory system, a larger proportion of whom would belong to occupations involving greater risks. By weighting the special rates of sickness
for the respective occupational classes in accordance with the distribution
of persons under the insurance scheme, average rates of sickness for the
whole population were obtained, which were found to be about 10 per
cent, above the general Manchester Unity standard. On the other
hand, the compulsory scheme, unlike the friendly societies, would not
have to provide for sickness due to industrial accidents. It was considered that these two factors would neutralise each other, and therefore
the table referring to the whole membership of the Manchester Unity
(Manchester Unity Sickness Table [19]) was adopted in the preliminary
calculations [20, 21]. Although it referred to men only, it was decided to
apply it, in the absence of sufficiently reliable special data for women,
to the whole insured population.
The Actuarial Committee of 1912 made a number of adjustments in
the Manchester Unity table, the most important being that intended to
allow for the waiting period of three days in the case of insured persons
applying for sickness benefit for the first time within a year. Since the
friendly societies have no such provision, the benefit periods to which the
1
To complete the summary account given here reference may be made to
another publication of the INTERNATIONAL LABOUR OFFICE—Studies and
Reports, Series M (Social Insurance), No. 14, Geneva, 1937, The Evaluation
of Permanent Incapacity for Work in Social Insurance—which contains a
detailed study, based on legislation and legal decisions, of the British conception
of 2incapacity.
These definitions of sickness and disablement rates will be used throughout
the present study.
452
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
Manchester Unity tables refer begin with the first day of sickness. The
various adjustments made in the Manchester Unity table, and the
arithmetical methods by which they were effected, are described and
discussed in the appendices to the first annual report [22] on the administration of the health insurance scheme, which include also a sickness
table for both sexes and separate disablement tables for men and
women. The same Committee recommended for computing the initial
reserves a loading of 12a/4 per cent, on the Manchester Unity rates in
order to provide a safety margin.
The practical working of the scheme soon showed that sickness was
more frequent among women than among men, and that the use of a
common table ought to be abandoned. In 1919, therefore, at the same
time as the publication [14J of the bases of the first actuarial valuation 1 ,
special sickness rates were published for women, higher than those for
men, and at the same time the disablement rates for women were raised.
The bases used for the second actuarial valuation were the same except
for a special liability added in the case of married women.
The studies made by the Royal Commission of 1924 led to the conclusion that the Manchester Unity table should be retained as a basis
for men but rejected for women. For men, however, a small redistribution of the rates was made between sickness and disablement and also
the previous loading of 12 s / 4 per cent, was dropped. For women were
introduced the rates which had just been calculated from a study of a
group of approved societies so chosen as to constitute a microcosm of
the whole insured population. This selected societies' experience
covered about 500,000 men and 400,000 women during the years 1921,
1922 and 1923. The figures for 1923, which were higher than the
average for the three years, were chosen and loaded by 10 per cent.
The change meant that the technical bases of the scheme were brought
into closer relation with the results obtained from the operation of the
Act 2 and that sickness tables putting married women in a separate
category could be used. These tables [14: 1929] served as the basis
for the third actuarial valuation.
As regards women, the rates drawn from the selected societies'
experience were iñ turn found no longer to reflect current experience.
On the basis of the figures in the returns of a group of representative
societies relating t o the years 1928-1930, which were reduced by 10 per
cent., the sickness rates applicable to spinsters and widows and those
applicable to married women aged 39 or over were lowered, while those
applicable to married women aged under 39 were raised. Separate
disablement rates were established for spinsters and widows, on the one
hand, and married women on the other. The rates which were finally
used as the basis of the fourth actuarial valuation are reproduced in
table II.
MARRIAGE AND WIDOWHOOD
RATES
The practical application of certain clauses governing the payment of
.contributions or the granting of benefit depends on the marital condition
of the insured person.
l
" Chapter III will return to the subject of the four actuarial valuations that
have
been made in the health insurance scheme.
2
For a thorough statistical study of sickness and disablement as observed
in the operation of the Act, cf. the articles by Sir A. W. Watson
[46, 47].
GREAT BRITAIN AND NORTHERN
TABLE II.
453
IRELAND
MORBIDITY AND INVALIDITY
TABLES
Average number of weeks of sickness and disablement
benefits payable
to 100 members within one year 1
Age
16 years
17
»
18
"
±9
»
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
»
»
»
»
»
"
»
»
»
»
»
»
»
»
"
»
"
»
"
»
».
"
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
"
»
»
»
»
»
»
»
Men
....
84
81
76
71
67
64
63
62
61
61
61
61
61
62
63
64
65
67
68
70
72
74
77
80
83
86 '
89
92
95
99
103
108
113
118
123
128
134
139
145
152
159
167
176
184
193
203
214
224
235
Sickness
Spinsters Married
and
widows women
80
82
84
85
86
87
87
87
87
86
86
85
84
83
82
81
80
80
80
81
82
83
85
87
89
92
95
98
101
104
107
110
114
117
121
124
128
132
137
142
147
152
158
164
171
179
188
199
212
320
319
318
316
314
311
307
301
291
277
262
248
236
226
218
211
205
200
196
193
190
187
185
183
182
181
181
180
180
180
180
181
182
183
185
186
188
190
193
196
199
202
206
210
215
221
228
237
248
Disablement
Spinsters Married
Men
and
widows women
——
10
13
16
19
21
24
26
28
30
32
33
34
36
37
39
41
43
45
47
49
52
55
58
61
65
68
71
74
78
82
87
95
105
116
130
145
162
180
201
223
249
279
315
359
411
472
540
—
—
15
23
31
39
47
55
63
70
77
84
90
96
102
108
. 113
118
122
126
130
134
138
142
' 147
152
158
164
171
179
187
196
206
217
229
241
254
269
286
305
326
350
377
408
443
483
528
579
637
•
—
—
55
63
71
79
87
95
103
110
117
124
130
136
142
148
153
158
163
168
174
• 181
188
196
> 205
215
226
238
251
265
281
298
316
336
357
380
405
432
461
493
528
567
610
657
708
763
822
885
952
i The above are " central rates ", i.e. the total number of weeks of sickness or
disablement benefit payable during the year of age following the exact age given in the table
per hundred of persons alive in the middle of that year of age.
454
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
Data Used for the Preparatory Studies [20]
In making the preliminary estimates, use had to be made of the
following data:
(1) rates of marriage, at each age, of spinsters and widows respectively;
(2) the proportion of married women at any given age who become
widows in the course of the year (widowhood rate) ;
(3) the probabilities in regard to marital, condition of insured persons
(men and women) at a given age.
The rates of marriage of spinsters and widows were deduced from the.
registered marriages for the ten years 31 March 1896 to 31 March 1906,
compared with the female population at various ages enumerated at the
census of 1901, that is to say the middle point of the ten years referred to.
With regard to the proportion of married women at any given age who
become widows in the course of the year, there were no statistics immediately bearing upon this point. The proportion was accordingly calculated directly. For England and Wales the 1901 census figures were
used to obtain the distribution of husbands and wives for various combinations of ages. The mortality rates of the husbands were assumed to
be those shown by the English life table No. 6 (males). For Scotland
and Ireland, the distribution of husbands and wives for various combinations of ages was obtained, in the absence of any table, by adjusting the
results derived from the English table in order to allow for the fact that
there is a slightly greater difference of age between husbands and wives
in Scotland and Ireland than in England and Wales.
The probability that an insured man will at a given age be a bachelor,
a married man or a widower was calculated from the 1901 census returns,
the rates of mortality for married men and bachelors being taken to be
the same. The same probabilities were next calculated for women.
These data were also used for the 1st and 2nd valuations.
Data used Subsequently
The adoption of the 1920-21 (England and Wales) life table as the
general mortality basis involved consequential changes in the widowhood
rates employed in the third and fourth valuations. No change was
made in the original marriage rates used in the first and second valuations.
Table III gives the marriage rates (for spinsters and widows) and the
widowhood rates used as a basis for the fourth actuarial valuation.
ISSUE
RATES
In the preparatory work [20] the probability of issue to a married
man was calculated—in the absence of statistics for the United Kingdom
—from statistics relating to New Zealand suitably modified to allow
for the lower birth rates prevalent in the United Kingdom.
The rates of issue to married women were calculated from:
(1) the rates of issue to married men;
(2) the table mentioned above showing the distribution of husbands
and wives according to various combinations of ages.
GREAT BRITAIN AND NORTHERN
IRELAND
455
TABLE I I I . — P R O B A B I L I T I E S OF MARRIAGE FOR WOMEN AND P R O B A B I L I T I E S
OF BECOMING A W I D O W
Probability
of marriage Probability
(spinsters of becoming
and
a widow
widows)
Age
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
. . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
0.0071
0.0164
0.0309
0.0494
0.0689
0.0866
0.1005
0.1085
0.1112
0.1091
0.1035
0.0955
0.0862
0.0766
0.0672
0.0586
0.0509
0.0443
0.0386
0.0338
0.0298
0.0264
0.0234
0.0208
0.0038
0.0038
0.0039
0.0040
0.0040
0.0041
0.0042
0.0043
0.0044
0.0045
0.0046
0.0048
0.0050
0.0052
0.0054
0.0056
0.0058
0.0061
0.0064
0.0067
0.0070
0.0073
0.0076
0.0080
1
Age
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64.
. . . .
Probability
of marriage Probability
(spinsters of becoming
and
a widow
widows)
0.0186
0.0167
0.0150
0.0135
0.0121
0.0109
0.0098
0.0088
0.0079
0.0071
0.0063
0.0056
0.0049
0.0043
0.0037
0.0033
0.0028
0.0024
0.0021
0.0018
0.0016
0.0014
0.0012
0.0010
0.0009
0.0084
0.0089
0.0094
0.0100
0.0106
0.0113
0.0120
0.0127
0.0135
0.0144
0.0154
0.0165
0.0178
0.0192
0.0207
0.0223
0.0240
0.0258
0.0277
0.0298
0.0321
0.0345
0.0371
0.0400
0.0432
i The above are "central rates", e.g. the probability of marriage of a spinster or a
widow is the ratio of the number of marriages in a year of age following the exact age given
in the table to the number of spinsters and widows alive in the middle of that year of age.
The work of the 1912 Actuarial Committee [22] made it possible to
put the New Zealand results aside and to make use instead of the
statistics derived from an analysis of the returns of the general
1911 census relating to the Metropolitan Borough of Camberwell, which
was selected as being on the whole representative of the general population.
These statistics showed, by quinquennial age groups:
(1) the numbers of husbands and of wives (excluding widows and
widowers) ;
(2) the numbers of husbands and of wives with one or more children
under one year of age (twin births being counted as single births).
From these figures issue rates were calculated in respect of:
(1) married men;
(2) all men;
(3) married women, irrespective of age at marriage (" aggregate "
values) ;
(4) married women according to age at marriage (" select " values).
456
ACTUARIAL TECHNIQUE AND FINANCIAL
ORGANISATION
Judging from the results obtained from the working of the health
insurance scheme itself, the Actuarial Committee appointed in connection
with the Royal Commission of 1924 concluded [33]:
(1) that the rates in relation to the age of the fathers must be subjected
to a proportionate reduction to 85 per cent, of their original
values ;
(2) that the rates in relation to the age of the mothers should be
taken from the ' results of the Selected Societies' experience,
subject to a fixed loading of 10 per cent.
• The issue rates computed on the basis of these recommendations
were used in the case of men for the third actuarial valuation. In the
case of women a further reduction of 15 per cent, was made in the issue
rates as part of the revision of the women's basis as from 1 January
1933 made in the light of the experience of 1928-30 K The issue rates
used for the fourth valuation were thus obtained; they are reproduced
in table IV.
TABLE IV.
PROBABILITY OF ISSUE TO A MEMBER DURING ONE YEAR
Age
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
. . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Men
.
—
—
0.001
0.008
0.023
0.045
O.068
0.089
0.107
0.122
0.135
0.145
0.152
0.157
0.160
0.160
0.158
0.154
0.148
0.141
0.132
0.123
0.112
0.102
Married
women 2
Spinsters
and
widows 2
0.340
0.510
0.590
0.530
0.440
0.355
0.285
0.240
0.210
0.189
0.171
0.156
0.143
0.131
0.120
0.110
0.100
0.091
0.082
0.073
0.065
0.057
0.049
0.041
—
0.002
0.003
0.004
0.005
0.006
0.006
0.006
0.005
0.005
0.005
0.004
0.004
0.004
0.004
0.003
0.003
0.003
0.003
0.003
0.002
0.002
0.002
0.002
Age
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
. . .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Men
.
0.091
0.081
0.071
0.062
0.054
0.046
0.039
0.033
0.028
0.024
0.020
0.016
0.014
0.011
0.009
0.007
0.006
0.005
0.004
0.003
0.002
0.002
0.002
0.001
0.001
Married
women 2
Spinsters
and
widows2
0.033
0.026
0.019
0.013
0.008
0.005
0.003
0.002
0.001
0.001
0.001
0.001
0.001
0.001
—
—
—
—
—
—
_
—
—
.—
—
—
—
—
—'
—
1
—
—
—
—
—
.—.
—
—
•
—
—
—
—
—
—
—
—
—
—
—
—
i The above are " central rates ", i.e. the ratios of the number of maternity benefits
payable in the year of age following the exact age given in the table per thousand of
persons
alive in the middle of that year of age.
s
Provision for posthumous births is made in the rates applicable to married women.
1
See above, p. 452.
GREAT BRITAIN AND
NORTHERN
IRELAND
457
§ 2. — Insured Population
Insurance is compulsory for all persons of the age of 16 1 and upwards
who are employed within the meaning of the Act 2 .
Persons liable to be insured are entitled to apply for admission to approved societies and if they are not a member of one within a certain time
after entry into insurance, are treated as deposit contributors, in which
case they are entitled to benefits only 3up to the amount of the contributions made by or in respect of them . If, however, within two years
of entry into insurance a deposit contributor is able to prove that the
state of his health is such that he cannot obtain admission to an approved
society he is admitted to a special " insurance section " of the Deposit
Contributors Fund and is entitled to the normal benefits of the scheme.
Besides 4members of approved societies and deposit contributors the
scheme covers members of the forces of the Crown who do not join
approved societies. These persons are grouped in a special fund—-the
Navy, Army and Air Force Insurance Fund.
PREPARATORY ESTIMATES
When the preparatory work on the scheme was in progress, use had
to be made of the most recent census statistics available, namely those
for 1901. The proportion of the occupied population that would become
liable to insurance was estimated separately for England, Wales, Scotland, and Ireland. Even for a given occupation there was considerable
difficulty in calculating the ratio of the insured population to the
occupied population. In most cases a more or less arbitrary approximation had to be accepted, namely that the whole of the occupation would
be liable to insurance or else that it would be excluded. Persons working
for an employer were distinguished from persons working on their own
account. Finally, a table of the distribution of the insured population
by quinquennial age-groups and by sex, derived from the 1901 census
figures, was constructed for the whole of the United Kingdom.
This preliminary estimate was next related to the date chosen for the
application of the proposed scheme, namely 1 May 1912 6. For this
purpose, the population was assumed to have increased between 1901
and 1912 on the basis of the same net migration and mortality rates as
were experienced between 1891 and 1901.
1
As from 4 April 1938, all boys and girls leaving school and taking up
insurable employment before reaching the age of 16 have been brought within
the scope of the scheme by the Juvenile Contributors Act [18] of 1937 for the
purpose
of medical benefit only.
2
For the definition of " employed persons " and for the persons or classes of
persons not liable to insurance, cf. INTERNATIONAL LABOUR OFFICE: Studies
and Reports, Series M, No. 10, Compulsory Pension Insurance, Geneva, 1933,
pp.3 101-103.
These contributions are credited to a special fund, the Deposit Contributors
Fund,
and entered in a personal account.
4
The group of " exempt persons " is not considered here. Until 30 April 1921
(in Scotland, 31 December 1920) they were entitled to medical benefit and
sanatorium benefit, after that date to medical benefit only. Exempt persons
are,
however, not entitled to medical benefit in Northern Ireland.
6
The scheme actually came into operation on 15 July 1912.
458
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
EXPERIENCE OF OPERATION OF SCHEME
In an article [46] published in 1927 Sir A. W. Watson gave the tables
reproduced below, showing the age distribution of the insured population
on the one hand and of the persons entering into and passing out of
insurance on the other. The figures for the insured population of
Great Britain and Northern Ireland include the members of the approved
societies and of the Navy, Army and Air Force Insurance Fund, but not
the deposit contributors. They are derived from returns one-fifth of
which relate to the end of 1922 and the rest to the end of 1923. The
number of entrants and exitants was calculated on the basis of a sample
enquiry relating to the years 1921-1923.
TABLE
V.
(a) A G E - D I S T R I B U T I O N OF ENTRANTS INTO
E X I T A N T S FROM NATIONAL HEALTH INSURANCE
AND
(Sample experience, 1921-1923)
Women
Spinsters
Married
and widows
Entrants | Exitants Entrants | Exitants Entrants | Exitants
Men
Agei
61
12
6
5
4
6
4
2
* 17
16
13
21
14
12
59
19
8
4
3
4
2
1
100
100
100
16 years .
17-19 years
20-24
»
25-29
»
30-34
»
35-44
"
45-54
»
55 years a n d 0 v e r
1 «I
28
20
12
14
8
6
1
14
23
20
27
12
3
7
21
22
30
14
6
100
.100
100
i " Age " in this table is the difference between the year in which the event occurred
and the year of birth.
(b) A G E - D I S T R I B U T I O N OF THE I N S U R E D P O P U L A T I O N OF GREAT BRITAIN
AND N O R T H E R N IRELAND (EXCLUSIVE OF DEPOSIT CONTRIBUTORS)
AT 1922-1923
(In thousands)
Age (last birthday)
16-19 years
20-24
'
25-29
'
30-34
'
35-39
'
40-44
'
45-49
'
50-54
'
55-59
'
60-64
'
65-69
'
O v e r 70 years
Total
Men
Women
Spinsters
Married
and widows
women
1,303
1,588
1,250
1,122
1,047
973
901
763
603
446
288
235
1,103
1,100
548
310
220
171
143
116
94
69
42
30
8
102
158
145
134
121
99
72
47
29
13
10
10,519
3,946
938
GREAT BRITAIN AND NORTHERN IRELAND
•
459
More recent figures giving the age distribution of members of approved
societies were recorded [43] as at 31 December 1931 and are reproduced
in table VI below.
TABLE V I .
AGE DISTRIBUTION P E R THOUSAND MEMBERS OF A P P R O V E D
SOCIETIES AS AT 3 1 D E C E M B E R 1 9 3 1
Age
25-35
35-45
45-55
55-65
Women
Men
»
»
»
»
268
257
190
164
121
457
246
138
98
61
1,000
1,000
The number of persons insured under the scheme is published annually
for each country, sex, and category. The following table shows the
aggregate results:
TABLE V I I .
NUMBER OF I N S U R E D P E R S O N S :
EXPERIENCE
(United Kingdom)
Women
Men
'
Years
Members
of approved
societies
Deposit
contributors
Navy,
Army and
Air Force
Members
of approved
societies
Deposit
contributors
1912-13 . . .
1914
.
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934 !
1935 1
1936 1 . . . .
8,959,200
9,173,900
9,269,700
9,486,600
9,481,100
9,599,100
9,633,200
9,662,900
9,770,600
9,945,100
10,069,000'
10,319,700
10,467,600
10,757,600
10,932,800
10,848,200
10,980,900
11,206,700
11,314,200
11,379,900
11,246,700
11,277,100
11,408,900
11,765,550
242,700
225,800
224,900
216,800
230,700
223,100
290,900
256,900
184,600
188,500
180,500
177,400
177,300
182,800
172,000
160,800
156,400
154,200
152,700
147,300
140,600
133,400
132,550
136,850
106,000
245,000
430,000
590,000
780,000
860,000
360,000
260,000
255,000
233,000
176,000
167,500
165,400
156,400
152,400
145,400
135,300
129,300
124,300
121,300
118,300
114,300
120,300
125,300
3,847,500
3,909,900
4,036,900
4,390,900
4,685,200
4,998,700
4,972,600
4,936,900
4,808,400
4,933,800
5,073,400
5,266,000
5,356,000
5,467,700
5,571,300
5,713,900
5,804,500
5,882,100
5,904,000
5,904,100
5,855,150
5,879,000
5,936,700
6,032,050
103,700
96,800
98,600
130,000
155,600
170,600
171,000
131,900
99,800
92,900
91,800
95,100
98,700
104,800
102,800
102,300
107,900
114,700
116,100
121,050
125,800
133,300
135,550
140,200
i Approximate figures subject to adjustment.
460
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
It should be noted that the figures contained in this table are not
always comparable. The number of insured men could only be estimated
approximately in the years 1915-1919. Until 1921 the figures for the
various categories referred to Great Britain only, whereas from 1922
onwards they refer to the whole of the United Kingdom. Again, since
1920 the membership of the approved societies has represented the
number of members on the books of the societies at the end of the year
(including those temporarily remaining insured persons after ceasing
to be employed), whereas before that date it was based on the number
of contribution cards surrendered, increased by the approximate number
of members serving with the forces. Finally, the upper age limit
remained at 70 years until 1927, but was lowered in 1938 to 65 years.
Below is given a table showing the membership of the approved
societies as calculated at the different actuarial valuations [30, 35,
38, 43]:
TemporMen
Spinsters Married
and
widows women
«y
insured
married
women
(class K)
(In thousands)
1st actuarial valuation: 31 Dec. 1938.
Figures revised so as to take account of the exclusion of the Irish
Free State
9,956
•5,430
36
1
2nd actuarial valuation: 31 Dec. 1922,
31 Dec. 1923
Figures revised so as to take account
of the lowering of the upper age limit
from 70 to 65
10,094
9,807
3,916
928
261
4,789
3rd actuarial valuation: 31 Dec. 1927,
31 Dec. 1928, 31 Dec. 1929 . . . .
10,816
4,295
1,132
136
4th actuarial valuation: 31 Dec. 1931,
31 Dec. 1932, 31 Dec. 1933, 31 Dec.
1934
11,260
4,396
1,128
169
CHAPTER II
FINANCIAL ESTIMATES, BASES, AND EXPERIENCE
§ 1. — Contributions
Contributions are normally the same for all compulsorily insured
persons of the same sex. The rate is fixed irrespective of wages 1unless the insured person belongs to one of certain special categories .
The normal weekly contribution was at first fixed at the following
rates :
Men
Insured
person's
contribution
Employer's
contribution
Total
d.
d.
d.
4
3
3
3
1
6
The need of increasing benefits in order to bring them into line with
the higher cost of living led to the raising of these rates in 1920 to the
following figures :
•
Men
Insured
person's
contribution
Employer's
contribution
Total
d.
d.
d.
5
4
5
5
10
9
The introduction of widows', orphans' and old-age insurance lowered
the upper age-limit under the health insurance scheme from 70 to 65 years
1
For the rates of contribution for these categories, cf. Bibliography, No. 13.
462
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
for purposes of sickness and disablement benefit and of contributions,
and in consequence the contributions could be reduced to the following
rates, which came into operation on 1 January 1926 and are still in
force :
Women
Insured
person's
contribution
Employer's
contribution
Total
d.
d.
d.
4%
4
4%
4%
9
The technical data upon which the financial organisation of the scheme
is based, and which are used for the actuarial valuations, take account
of the non-payment of contributions by members during sickness, and
also during periods of unemployment up to an average of 2.6 weeks per
insured person per annum (i.e. up to an unemployment rate of 5 per
cent.).
The present probable value of the future contributions has been
calculated for the total insured population at each actuarial valuation.
The figure thus obtained is placed on the assets side of the actuarial
balance-sheet K
The total annual contributions actually paid appear in the first column
of table VIII.
§ 2. — State Grants
The original Act of 1911 fixed the principal State grant at twoninths of the expenditure on benefits and administration in respect of
men and one-fourth in respect of women. The Act of 1920 fixed a flat
rate of two-ninths, which was reduced by the Act of 1926 to one-seventh
for men and one-fifth for women.
The present probable value of future State grants is included on the
assets side of each of the actuarial balance-sheets 2. The total amount
of State grants actually paid in each year is shown in table VIII.
§ 3. — Total Income
The table below shows the total sums which in each year have been
credited under the head of contributions, State grants, and interest on
accumulated funds. The figures relate to Great Britain up to 1 March
1922 and to the United Kingdom after that date.
1
An actuarial balance-sheet is included in each of the four actuarial valuations already referred to. The four balance-sheets are brought together in
table XII.
2
See table XII below.
463
GREAT BRITAIN AND NORTHERN IRELAND
TABLE VIII.
RECEIPTS
(Thousand £)
•
Year!
1912-13
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934 2
1935 2
1936 2
butions
26,572
16,797
18,284
17,784
18,166
18,245
18,205
22,688
25,190
25,314
26,580
27,799
28,119
24,819
26,746
26,389
26,386
26,473
26,233
26,813
26,497
27,399
27,805
29,050
Interest
453
618
899
1,199
1,628
2,265
2,721
3,271
3,695
4,173
4,929
5,411
5,733
6,039
5,633
5,812
5,767
6,396
6,256
6,260
6,186
6,272
6,343
6,439
Parliamentary votes
and grants
. Total
33,419
23,152
25,640
24,142
25,559
27,965
29,560
36,165
40,644
38,027
38,513
40,447
42,109
38,018
40,143
39,521
39,973
40,389
39,740
39,407
38,824
39,983
40,962
43,105
6,395
5,737
6,457
5,159
5,764
7,455
8,634
10,206
11,759
8,540
7,104
7,237
8,257
7,160
7,764
7,320
7,820
7,520
7,251
6,334
6,141
6,312
6,814
7,616
i The 1912-13 ligures relate to tbe period 15 July 1912 to 11 January 1914, and tne 1914
figures relate to 12 January to 31 December 1914. Tbe later figures relate to calendar
years.
s Approximate figures subject to adjustment.
§ 4. — Benefits and Administration Expenses
Health insurance benefits, like contributions, are fixed at a flat rate
for men, unmarried and married women respectively. They comprise
cash benefits in respect of sickness, disablement, or maternity, and
medical benefit *. In addition, an approved society which on valuation
is found to have a sufficiently large surplus for the purpose may apply
a part of that surplus to the provision of additional benefits for its
members. These additional benefits generally consist of additions to the
normal rates of cash benefits and/or payments toward the cost of various
forms of special treatment, such as dental and ophthalmic treatment.
The normal rates of cash benefits were fixed by the 1911 Act as
follows :
Men
s.
Cash benefits:
Weekly sickness benefit
Weekly disablement benefit . . . .
Maternity benefit
d.
10
0
5 0
30
0
Women
s.
d.
7
6
5 0
30
0
1
S a n a t o r i u m benefit used also t o be g r a n t e d , b u t was discontinued ih
G r e a t Britain in 1921 a n d in N o r t h e r n I r e l a n d in 1930.
464
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
They were increased in 1920 to the following figures :
Men
Cash
s.
d.
s.
d
15
7
40
0
6
0
12
7
40
0
6
0
benefits:
Weekly sickness benefit . .
Weekly disablement benefit
Maternity benefit
The normal rates of sickness and disablement benefit payable to
women were reduced by the Act of 1932, being fixed as follows from
1 January 1933:
Unmarried
women
s. d.
Cash
Married
women
s. <1.
benefits:
Weekly sickness benefit . .
Weekly disablement benefit
12
6
0
0
10
5
0
0
QUALIFYING CONDITIONS
In order to be able to claim sickness and disablement benefits at the
above rates the insured person must have been continuously in insurance
for 104 weeks and have actually paid 104 contributions. A period of
26 weeks in insurance and the actual payment of 26 contributions,
however, gives a right to sickness benefit at a specified reduced rate of 9s.
for men and 7s. 6d. for women.
The payment of maternity benefit requires a period of 42 weeks in
insurance and the actual payment of 42 contributions.
MAINTENANCE OF RIGHTS OF PERSONS WHO ARE IN ARREARS
If there are arrears in the payment of contributions, sickness and
disablement benefits may be reduced or suspended, but for this purpose
arrears due to proved incapacity or unemployment are not taken into
account. Maternity benefit may also be suspended (other than maternity benefit granted to women who marry and cease work). The reduction or suspension during a benefit year (which approximates to the
calendar year) depends on the total number of weeks of contributions
(including weeks of sickness and credits in respect of unemployment)
during the preceding contribution year (i.e. the year ending in the previous July), as follows:
Total contributions paid
50 or over
36-49 . . . . . . . .
Effect on benefits
No reduction or suspension.
Sickness and disablement
benefits reduced according to scale 1. Maternity benefit not affected.
26-35
Sickness and disablement benefits suspended.
Maternity benefit not affected.
25 or under
Sickness, disablement and maternity benefits suspended.
1
This scale is reproduced in INTERNATIONAL LABOUR OFFICE, Studies and
Reports, Series M., No. 10, already cited. '
GREAT BRITAIN AND NORTHERN
IRELAND
465
ARREARS DUE TO UNEMPLOYMENT
The continuation of insuran.ee in the event of unemployment has been
one of the principal subjects of British insurance legislation since the
first step was taken in this direction by the Act of 1921. A special
study would be necessary to describe the successive measures that have
been taken on behalf of the unemployed. It may merely be recalled
that under the system recently introduced by the 1935 Act the rights
of unemployed insured persons are maintained:
(1) in full during a period of free insurance, varying from 18 to
24 months;
(2) after this period of free insurance, from year to year in regard to
medical and maternity benefit if the insured person had been
insured for ten years when his free period of insurance began.
The same Act set up a special Unemployment Arrears Fund to finance
the new expenditure involved and to equalise over approved societies
as a whole some part of the. losses arising from unemployment. The
working of this Fund is briefly summarised in the next chapter 1.
MEDICAL BENEFIT
All insured persons are continuously insured for medical benefit:
(1)
(2)
(3)
(4)
as long as they are insurably employed;
during incapacity for work;
for life after attaining the age of 65 ;
during 18 to 24 months after cessation of insurable employment
or after recovery from incapacity which commenced during such
employment ;
(5) during the period of extended insurance allowed in the manner
indicated above, if they prove inability to obtain employment.
The cost of medical benefit was not placed on a self-supporting basis
until the beginning of 1927. From that date the maximum amount to
be applied for the provision of the benefit and for its administration
has remained at 13s. per insured person.
The total sums granted each year under the head of the various benefits
are indicated in table IX, which refers to Great Britain up to 1 March
1922 and to the United Kingdom after that date.
ADMINISTRATION EXPENSES
The amounts allocated for the purposes of administration have been
varied from time to time and the present position is as follows.
Each approved society may appropriate each year for the purposes
of its administration an amount equal to 4s. 6d. per member, but this
amount is raised to 4s. 63/4d. if the society grants additional benefits
in cash, and may also be increased by 5 per cent, of the expenditure of
1
See below, p. 472.
30
466
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
the society on additional benefits in kind. The maximum annual amount
allowed for the administration of insurance committees is fixed at 6d.
per insured person who is entitled to medical benefit.' The State contributes to the administration expenses in the same proportion as to the
cost of benefits and in addition pays the whole cost of the administration
of the central departments.
The actual annual amounts expended on administration are shown in
table IX below.
TABLE IX.
EXPENDITURE
(Thousand £)
Benefits
Yeari
1912-13
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934l
1935 «
1936 4
Sickness
6,038
6,458
5,119
4,370
4,102
4,887
5,081
6,163
8,096
9.354
8,813
10,065
10,564
12,832
13,409
11,572
13,513
11,386
11,320
11,282
11,554
10,021
10,287
10,909
Disab- Materlement2 nity
184
832
1,108
1,232
1,309
1,396
2,002
3,063
3,877
4,397
4,820
5,253
6,364
7,424
6,397
6,691
6,596
6,306
6,497
6,306
6,545
6,643
6,727
1,223
1,368
1,270
1,221
1,045
1,009
1,188
1,924
1,994
1,881
1,793
1,747
1,751
1,807
1,787
1,798
1,784
1,850
1,808
1,754
1,621
1,634
1,644
1,717
Cost of administration
Medical
Other
benefits s
Total
benefits
3,755
5,620
4,571
5,011
4,728
5,561
6,507
10,017
10,710
9,628
9,227
9,203
9,458
9,586
9,822
10,137
10,381
10,313
10,938
10,156
10,363
10,277
10,609
11,086
711
817
772
692
790
859
1,233
1,084
605
419
688
742
978
2,011
4,062
3,105
2,852
3,409
3,366
2,915
2,651
2,608
2,584
2,927
11,727
14,447
12,563
12,401
11,897
13,625
15,405
21,190
24,468
'25,159
24,918
26,577
28,004
32,600
36,504
33,009
35,221
33,554
33,738
32,604
32,495
31,085
31,767
33,366
Approved
socie- Central
ties and departinsurance ments
committees
Total
3,157
2,316
2,475
2,442
2,391
2,515
2,946
3,666
3,900
3,810
3,869
3,861
3,940
4,125
4,248
4,358
4,423
4,678
4,728
4,665
4,749
4,643
4,639
4,712
4,075
3,002
3,177
3,135
3,156
3,367
4,062
4,979
5,389
4,970
4,960
4,923
5,011
5,167
5,299
5,374
5,508
5,791
5,826
5,725
5,811
5,720
5,732
5,834
918
686
702
693
765
852
1,116
1,313
1,489
1,160
1,091
1,062
1,071
1,042
1,051
1,016
1,085
1,113
1,098
1,060
1,062
1,077
1,093
1,122
i The 1912-13 flgures relate to the period 15 July 1912 to 11 January 1914, and the 1914
flgures relate to 12 January to 31 December 1914. The later figures relate to calendar
years.
2 Disablement benefit began in July 1914.
s Including Sanatorium Benefit, which was discontinued in Great Britain in 1921, and
in Northern Ireland on 30 September 1930.
* Approximate,flgures subject to adjustment.
CHAPTER III
FINANCIAL SYSTEM
§ 1. — Financial Equilibrium
The principle of the financial organisation of the health insurance
scheme has not undergone any important change since the scheme was
brought into operation in 1912.
The structure of the financial scheme has already been indicated to
some extent in the previous chapter in the reference made there to the
flat rates of contribution and benefit, irrespective of age at entry and
wages, and to the fixed ratios which the State grants bear to actual
expenditure (for men, unmarried and married women respectively).
BASIC PREMIUM
The fundamental technical basis of the scheme is the constant premium
relative to an insured person who normally completes his full insurance
career, that is to say, joins the scheme at the age of 16. This theoretical
basic premium is determined by balancing the present values of the
society's obligations and expectations in respect of the insured person
at the time he joins on the assumption that this takes place at age 16.
It satisfies what may be called the principle of " individual equity " for
insured persons joining at the minimum age.
In the course of the preparatory work the basic premium for age 16
was calculated separately for each class of benefit from the biometrie
and financial data mentioned in the previous chapters, account being
taken not only of the cost of benefits but also of the costs of administration. The first figures arrived at were [20]:
6.58d. a week for men ;
5.47d. a week for women.
The theoretical premiums so calculated were used as a basis for
determining the rates of contributions to be prescribed by the Act.
These were fixed slightly higher than the basic premiums, being 7d. for
men and 6d. for women. It was thus expected that there would be a
surplus of receipts which would provide a safety margin. This safety
margin subsequently disappeared when, as a result of the adjustments
made to the sickness and disablement rates t y the Actuarial Committee
of 1912 the theoretical premiums came to coincide with the statutory
rates of contribution [22].
By fixing the rates of contribution at the level of the theoretical basic
premiums, insured persons were secured, in every case, at least as
advantageous conditions as they would have found outside the health
insurance scheme. This guarantee was particularly necessary in Great
468
ACTUARIAL T E C H N I Q U E AND FINANCIAL
ORGANISATION
Britain, where the technical system introduced for the social insurance
scheme was similar to that of the friendly societies already in existence.
The rates of contribution have since been twice amended, but, on
both occasions, they have been kept close to the basic premiums as
calculated for persons of each sex entering insurance at the age of 16.
RESERVE VALUES AND TRANSFER 'VALUES
The financial structure of the health insurance scheme rests on the
notion of an individual actuarial reserve which is simply the difference
between the present values and expectations (part of the benefits and
cost of administration not paid by the State) and liabilities (part of
contributions credited to the institution) of each insured person with
regard to the institution to which he belongs.
The terminology in use in Great Britain distinguishes between the
actuarial reserve at the time of entry into insurance (the reserve value)
and the actuarial reserve at the time of exit by transfer to another
society or otherwise (the transfer value), these two values being calculated
on the assumption that the insured person at the time in question belongs
to a select healthy group of persons 1.
The reserve values differ from the transfer values and are always
smaller because the conditions of the qualifying period reduce the
expectations of the insured person during the first two years of his
membership of the insurance scheme, whereas there are no similar
conditions in the case of transfer from one society to another.
The calculation of the actuarial reserves is based on the data mentioned
in the two previous chapters. As the insured person is neither ill nor
disabled at the moment of becoming insured or of transferring from one
society to another, and as he therefore belongs to a specially selected
group, the disablement rates mentioned above are lowered before
being used for calculating the reserve values and transfer values.
The tables used from 1 January 1933 [15] onwards comprise schedules of:
(1) reserve values for three categories: men, spinsters and widows,
married women ;
(2) special reserve values for women who continue to be employed
for a year after marriage;
(3) transfer values applicable to persons transferring from one society
to another, established separately for the above three categories,
account being taken of the period of membership (under 6 months,
from 6 to 12 months, one year or over) ;
(4) transfer values applicable to persons ceasing to be insured, established separately for the three categories.
INITIAL LIABILITY
The total reserve values calculated for all insured persons affiliated
to approved societies during the first 15 months of application of the
Act was £69,500,000, The State subsidy (originally fixed at 2/„ of the
1
Each of these reserves differs from the general average reserve in respect
of members in all states of health, such as would be required at an actuarial
valuation of the Society. See below, p. 479.
GREAT BRITAIN AND NORTHERN
IRELAND
469
expenditure on benefits and administration in respect of men, and 1/i in
respect of women) enabled provisions to be made for a proportion of
the basic contribution to be retained by the central authorities in order
to liquidate this initial deficiency. The sum so retained was paid
into a sinking fund, which it was estimated at the outset would
provide for the payment of interest at 3 per cent., and the gradual
redemption of this capital sum in about 20 years, thereafter becoming
available for an extension of the statutory benefits. Subsequently, the
proportion of contributions retained for reserve value purposes has
been varied from time to time (see table XI) and in consequence the
probable date of redemption has been materially deferred \
REDEMPTION OF OUTSTANDING RESERVE VALUES
The first actuarial valuation [30] showed a liability of £64,000,000 in
respect of outstanding reserve values at 31 December 1918. The
extension of contributions and benefits under the Act of 1920 was
estimated to bring the liability up to £110,000,000, and the period
needed for its redemption to 35 years. At the second actuarial valuation [35] (1922-1923) the outstanding reserve values were estimated at
£97,400,000. The introduction of widows', orphans' and old-age insurance diminished the obligations of the health insurance institutions by
lowering the age limit from 70 to 65 years; on the other hand, the fraction
of contributions allocated to the redemption of reserve values was
reduced from 1 January 1926. In consequence of these new provisions
it was calculated that the liability would be completely redeemed by
1955. The third actuarial valuation [38] (1927-1929) showed a liability
of £49,600,000 in respect of outstanding reserve values, and the fourth
[43] (1931-1934) showed a total liability of £47,800,000. During the
period between the third and fourth valuations redemption had been
delayed by the admission under the Contributory Pensions Act of 1929
to voluntary insurance of a considerable number (about 60,000 men and
10,000 women) of persons in excepted employments.
Since the interest on outstanding reserve values (fixed a t 3 percent.)
is the first charge on the sinking fund contributions, the sum available
for redemption being the balance is' peculiarly susceptible to changing
conditions. During the last 15 years, when unemployment has been so
prevalent, the resulting retardation of the redemption of the reserve
values has been of material importance.
§ 2. — Financial Organisation
The finances of the health insurance scheme are administered separately from the general State finances. There are four distinct National
Health Insurance Funds for England, Wales, Scotland and Northern
Ireland respectively, which are under the management and supervision
of the Ministry of Health 1 for England and Wales, the Department of
Health 2 for Scotland, and the Ministry of Labour for Northern Ireland.
1
2
See pp. 470-473.
These authorities publish annual reports on the administration of health
insurance. [50, 51.]
470
ACTUARIAL T E C H N I Q U E
AND FINANCIAL
ORGANISATION
They are subject to audit by the supreme accounting authority (the
Comptroller and Auditor General) who reports direct to Parliament on
the results of his investigations. Within each of these four funds separate
special funds are kept for insured persons belonging to particular categories: navy, army and air force, exempt persons, deposit contributors.
Contributions, which constitute the main resources of the insurance
scheme, are collected through the Post Office by the sale of stamps,
the entire proceeds being paid to the Ministry of Health 1. They are
allocated in the first instance to the four National Health Insurance
Funds and then, after making the statutory deductions for reserve
values, contingencies fund, the Central Fund and the Unemployment
Arrears Fund are credited to the various approved societies, the Deposit
Contributors' Fund, the Deposit Contributors Insurance Section, the
Navy, Army and Air Force Insurance Fund, and the Exempt Persons'
Fund within the four National Health Insurance Funds, according to the
number of contributions claimed in respect of the different categories of
insured persons or of the members of different societies. Before studying
the apportionment of contributions within each National Health Insurance Fund, a brief account may be given of the principal funds on which
the financial organisation of the insurance scheme essentially depends 2.
RESERVE VALUES (APPORTIONMENT) ACCOUNT
The fractions of contributions allocated to the service of reserve
values are deducted by the Ministry of Health and paid into a sinking
fund, the Reserve Values (Apportionment) Account". From 1 January
1926 this Account receives out of every normal contribution 17/ao d. in
the case of men and 11/?0 d. in the case of women. Its purpose is in
the first instance to pay interest at 3 per cent, per annum on outstanding
reserve values and then to redeem these values. The sums not used for
the payment of interest are distributed among the approved societies
in proportion to the amount of their outstanding reserve values. The
sums deducted from contributions within each society for the service
of reserve values obviously cannot correspond to the sums finally allocated to the crediting of interest on outstanding reserve values and to
their redemption. The former can be fixed as soon as the number of
contributions is known, whereas the latter depend, in particular, on
the age distribution of the insured population and the marita! condition
of insured women.
RESERVE SUSPENSE FUND
The Reserve Suspense Fund is in essence a central fund within the
national funds. It is created for the purpose of facilitating credits and
debits in respect of reserve values and transfer values. It provides the
reserve value in respect of every insured person of the age of 17 years or
over becoming affiliated after 13 October 1913. It receives the transfer
1
For the sake of simplicity the supervising authority will be referred to
throughout as the Ministry of Health. This term is correct only for England
and Wales and should be interpreted as meaning the Department of Health for
Scotland
and the Ministry of Labour for Northern Ireland.
2
The position of each of these funds at the end of the year and a survey
of their operations are published in an annual statement of accounts; [54],
GREAT BRITAIN AND NORTHERN IRELAND
471
values in respect of persons ceasing to be insured for reasons other than
death. In the event of a transier it receives the transfer value from the
insured person's old society and pays it to the society to which he is
transferred. The Reserve Suspense Fund provides medical benefit for
persons of 65 years or over and in order that the necessary funds may
be available for this purpose, it receives from approved societies on
members attaining the age of 65 the appropriate sums in order to provide for the liability in respect of medical benefit for the remainder of
life. It acts as a reinsurance fund in respect of marriage among
insured women, receiving a fixed sum for marriage and paying out in
respect of such women as remain in insurance (about one-fifth) the
> reserve appropriate to a married woman of that age.
It is also liable to supply the special deficiency grants made in the
case of " apprehended deficiency " (i.e. where it appeared to the valuer
that a deficiency would be disclosed on valuation) to cover:
(a) total worsening due to the introduction of the 1926 Act ;
(b) losses due to arrears of contributions arising under the 1932 and
1935 Acts.
If the Reserve Suspense Fund is unable to meet these deficiency
grants, the burden falls on the Central Fund' 1 .
CONTINGENCIES FUNDS
Attached to each society is a fund known as the contingencies fund,
which serves as a primary relief fund to meet any deficiency revealed
by the actuarial valuation. When there is no deficiency, the contingencies fund is added to the benefit fund after the actuarial valuation and
will contribute to the amount of surplus at the following actuarial
valuation. In the case of a Society with registered branches a separate
valuation is made of each branch but there is a common Contingencies
Fund for the whole Society against which all deficiencies in the individual
branches are primarily chargeable. The income of the Contingencies
Fund
is drawn from a levy on contributions fixed by law at between
3
/16d. and 4/16d. Since 1 January 1936 the maximum of 4/i8d. has been
levied.
CENTRAL FUND
The Central Fund is a joint Fund for the whole of the United Kingdom,
which is administered by a joint committee of representatives of the
four countries. Its essential purpose is to meet any deficiency in a
society not covered by the Contingencies Funds so far as this excess
deficiency is attributable to causes beyond the control of the Society,
i.e. to abnormal rates of sickness due to occupation or unhealthy environment.
Its chief sources of income are:
1. A levy of one-fourth of the portion of the contribution allocated
for the purposes of the Contingencies Fund. This levy is only
made when the position of the Central Fund renders it necessary
and has in fact been discontinued since 1 January 1936;
i See below p. 472.
472
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
2.
3.
4.
Annual State subsidy of £150,000 (only payable before 1921) ;
Nine-tenths of sums received from unclaimed insurance stamps;
Health insurance portion of contributions paid by employers in
respect of persons who continue in employment after the age of 65 ;
5. Any amounts of benefits in excess of £50 when an insured person
is being treated in hospital.
6. The interest of the Fund itself.
Table X shows the growth of the Central Fund.
TAHLE X.
CENTRAL FUND
Expenditure
Receipts
A t 31
December
Contri- S t a t e
butions g r a n t s
Interest
Miscellaneous *
£
£
£
£
£
1918-1919
1920. . .
1921.
1922.
1923.
1924.
1925.
1926.
1927.
1928.
1929.
1930.
1931.
1932.
1933.
1934.
1935.
1936. . .
Unclaimed
stamps
Grants
t o so- Other
Higher
cieties grants cost of
in aid to so- medical
of defi- cieties i benefit
ciencies
£
_
157,131
986,181 450,000
276,680 150,000
100,788
943
—
—
8,870
106,227
—
—
.—
—
10,561
109,415
10,164
—
—
—
3,312
82,027
—- 2,661,5122
—
—
—
1,823
193,877
4,350
—
55
59,987 138,346
895
2,000
—
29
60,750
94,504
42 21,258
—
8
69,637
85,377
61,155
——
10
77,192
8,457
—
—
—
2
81,793
—
—
—
—
2
44,446
. 908 18,742
—
—
84,000
6,544 446,242
—
—
—
180,605
107,421 1,453,329
6,385
—
173,118
200,000
107,386
278,418
2,185
—
192,741
347,250
127,684
286,518
30,563
—
201,165
283,625 154,858 286,128 433,191
—
225,878
268,775 150,889
276,866 51,860
—
•
—
•
£
£
•
—
—
—
•
•
—
•
371,508
506,428
1,014,855
1,034,710
— 1,159,893
81,397
—
24.878
—'763
—
406,671
295
169,244
—
617
—
25,739
—125,547
—
789,157
—
26,340
—
—
—
•
—
•
Miscell- Balance
aneous» at end
of year
£
£
1,593,312
— 2,119,838
3,916 2,231,018
55,922 1,913,399
2,443 1,489,869
—_ 3,336,577
— 2,499,151
12,219 1,461,104
— 1,595,885
1,656,666
— 1,737,698
— 1,357,446
101,702 730,802
1,297 2,463,858
2,316 3,192,540
11,568 3,979,055
80,959 3,601,524
7,753 4,437,979
—
•
i Payable from the Central Fund when the Reserve Suspense Funds are unable to meet the deficit.
2 Including £100,000 as special grant under section 2 of N.H.I. (Cost of Medical Benefit) Act, 1924.
3 From 1931 onwards interest credited to National Health Insurance funds on grants paid in arrear.
* From 1932 onwards the greatest part of these receipts came from the Health Insurance portion of
contributions paid by employers in respect of persons who continue In employment after the age of 65.
UNEMPLOYMENT ARREARS FUND
This fund was set up under the 1935 Act and commenced to operate
as from July 1934. In addition to meeting expenditure arising out of
the extension of insurance and excusai of arrears in the event of unemployment it serves to equalise some part of the contribution losses
experienced by individual societies. It is financed as to one half out of
a levy on each contribution, and as to the other half out of moneys
provided by the State. The levy on contributions which is retained out
of the approved societies' benefit funds was fixed for the period July 1934
to December 1935 at 1 / 4 d. per contribution for men and 1/10d. per contribution for women. As from January 1936, owing to the improvement
in employment, the levy has been reduced to 1/td. for men and 1/12d. for
GREAT BRITAIN AND NORTHERN IRELAND
473
women. A further reduction in the levy to 1/12d. for men and 1/2id. for
women came into operation from the beginning of 1937.
Out of this Fund there is credited to the approved societies S1/^. for
each week of proved unemployment per member.
APPORTIONMENT OF CONTRIBUTIONS
The essential machinery of the financial organisation of the scheme and
the changes that have taken place since its inception are brought out
by the following table, which shows the main figures successively adopted
for the apportionment of contributions.
TABLE XI. — APPORTIONMENT OF WEEKLY CONTRIBUTION
From
15/7/1912
(revised in
1918 A c t
retrospectively)
Men | W o m e n
For the benefit funds .
For protective
reserves. .
For service of
reserve values .
Total
. .
Prom
15/7/1912
to 4/7/1920
(according t o
1918 Act)
Men |Women
From
5/7/1920
to 31/12/1920
From
1/1/1921
t o 31/12/1925
From
1/1/1926
Men | Women
Men
¡Women
Men
d.
d.
d.
d.
d.
d.
d.
|Women
d.
5«/.
4V,
5*/.
4V.
7V.
7V«
7'/.
-71/.
'Vio
V.
Va
V.
V.
V.
V.
V«
17/
ISO
11
IV.
IV,
IV.
7
6
7
6
Va.
IVa
10
V.
IV»
9
IVa
10
d.
d.
1
7Vl0 X
1
'20
9
9
»vT
i As from 2 July 1934 these figures include the levies for the benefit of the Unemployment Arrears
Fund.
§ 3 . — Actuarial Balance-Sheets
An analysis was given in the preceding paragraph of the basis of
financial equilibrium and the essential features of the financial organisation of the insurance scheme. The documents showing the financial
situation, i.e. the actuarial balance-sheets drawn up as a result of each
of the actuarial valuations, will now be reproduced.
The principal items in those balance-sheets are:
1.
On the liabilities side the total present probable value of benefits
and administration expenses;
2. In the assets side the total present probable value of contributions,
the total present probable value of State subsidies and the amount
of accumulated funds.
The present values are calculated for the insured population existing
at the date of the valuation in each society on the basis set up in the
Valuation Regulations in force. The amount of accumulated funds
is estimated in accordance with definite rules to which reference will
be made later 1 . The funds of the societies shown in the valuations include
1
See p. 479.
474
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
the amount of unredeemed reserve values. The difference between the
present probable value of benefits including cost of administration,
and the present probable value of the part of the contributions credited to
the societies, increased by the present probable value of State grants, represents the general average reserve, which can also be computed directly.
Special grants to prevent deficiencies from appearing 1 operated from
1 June 1926 and are included as assets in both the third and fourth
actuarial balance-sheets. In the former instance, however, they were
included under the heading of " other assets " and in the latter they
were shown as a separate item.
TABLE XII. — SUMMARIES OF VALUATIONS BALANCE-SHEETS
1st Valuation (31 December 1918)
(rate of interest 3 % p.a.)
LIABILITIES
£
Present Value of Benefits,
and Cost of Administration
451,307,197
Contingencies Funds
6,569,449
Other Liabilities
1,154,347
Administration
Balances,
etc
2,378,075
Surpluses . .
17,273,887
less Deficiencies
80,919
Net Surplus .
ASSETS
£
Present Value of Future
Contributions
253,995,536
Present Value of State
Grants
103,599,634
Total Funds
. 119,479,279
Other Assets
1,527,587
17,192,968
478,602,036
478,602,036
2nd Valuation (1922-1923)
(rate of interest: 3 % P-a-)
LIABILITIES
ASSETS
£
Present Value of Benefits,
and Cost of Administration
610,475,666
Other Liabilities
32,158
Surpluses . .
42,413,319
less Deficiencies
91,675
Net Surplus
Present Value of Contributions
333,013,790
Present Value of State
Grants
135 584,752
Total Benefit Funds . . . 180,973,104
Appreciation in the Value
of Securities
1,651,285
Other Assets
1,606,537
42,321,644
652,829,468
652,829,468
3rd Valuation (1927-28-29)
(rate of interest: 4% p.a.)
LIABILITIES
£
Present Value of Benefits,
and Cost of Administration
- . 541,745,721
Surpluses . .
36,638,344
less Deficiencies
847,667
Net Surplus
1
See above, p. 471.
ASSETS
£
35,790,677
Present Value of Contributions
330,703,314
Present Value of State
Grants
86,788,868
Total Benefit Funds . . . 156,023,648
Appreciation in the Value of
Securities
2,198,060
Other Assets
1,822,508
577,536,398
577,536,398
475
GREAT BRITAIN AND NORTHERN IRELAND
4th Valuation (1931-32-33-34)
(rate of interest: 4% p.a.)
ASSETS
LIABILITIES
£
Present Value of Benefits,
and Cost of Administration
550,905,913
Surpluses . . 37,484,686
less Deflcien• cies . . . .
740,983
Net Surplus
36,743,703
587,649,616
Present Value of Contributions
Present Value of State
Grants
Total Benefit Funds . . .
Special Grants made in the
case of " apprehended
deficiency " under Section 3 of the National
Health Insurance Act,
1926
Other Assets
£
340,500,696
87,602,106
157,495,239
946,661
1,104,914
587,649,616
CHAPTER IV
FINANCIAL ADMINISTRATION
§ 1. — Investment of Funds
The Minister ascertains periodically the sums standing in the National
Health Insurance Fund to the credit of each approved society, the Navy,
Army and Air Force Insurance Fund, the Deposit Contributors Fund,
the Deposit Contributors Insurance Section, and the Reserve Suspense
Fund, which are available for investment.
One half of the sums so ascertained in respect of a society is carried to
a separate account called the " Investment Account " and the remaining
half is, at the option of the society, (a) paid over to. the society for
investment, or (b) invested by the Minister on behalf of the society in
securities selected by the society, or (c) carried to the credit of the
society with the other half in the Investment Account.
INVESTMENT OF FUNDS STANDING IN THE INVESTMENT ACCOUNT
Sums carried to the credit of societies in the Investment Account
(together with other balances in the National Health Insurance Fund,
the Central Fund and the Unemployment Arrears Fund not required
to meet current liabilities) must be paid over to the National Debt
Commissioners, and by them invested in accordance with regulations
made by the Treasury in any securities which are for the time being
authorised by Parliament as investments for Savings Banks funds 1.
The Commissioners must, in making the investment, give preference
to stocks or bonds issued under the provisions of the Acts relating to
borrowing for raising capital for the purposes of the Local Loans Fund
where the purpose for which the capital is required is the making of
advances for the purposes of the Housing Act, 1936.
The Commissioners must present to Parliament annually an account
of the securities held by them in which moneys forming part of the
National Health Insurance Fund, the Central Fund, and the Unemployment Arrears Fund are for the time being invested.
Selection by the National Debt Commissioners from among the
authorised investments is the responsibility of the Commissioners
themselves, although they may ascertain the views from time to time
1
The investments authorised for Savings Banks Funds are securities issued
by the authority of Parliament, the interest on which is a charge on the
Consolidated Fund of the United Kingdom.
GREAT BRITAIN AND NORTHERN
IRELAND
477
of the Financial Advisers to the National Health Insurance Joint
Committee. The financial advisers are the Government Actuary and
the ccountant-General of the Ministry of Health.
The holdings of the National Debt Commissioners at 31 December 1937
on behalf of the National Health Insurance Funds were as follows:
1. Investments on behalf of approved Societies, the Deposit Contributors Fund, the Navy, Army and Air Force Insurance Fund,
and the Reserve Suspense Fund (for Great Britain) :
£
2y2 percent. Consolidated Stock
Local Loans 3 per cent. Stock
Guaranteed 2% per cent. Stock
Guaranteed 3 per cent. Stock
3y2 per cent. War Stock
4 per cent. Funding Stock, 1960-1990 . . .
3% per cent. Conversion Stock
4 per cent. Consolidated Stock
3 per cent. Funding Stock, 1959-1969 . . .
2.
190,000
72,572,256
2,466,176
4,167,997
20,438,305
712,549
10,524,259
5,748,100
686,816
Investments on behalf of the Central Fund:
£
Local Loans 33 per cent. Stock . . . . . .
Guaranteed 2 /4 per cent. Stock
Guaranteed 3 per cent. Stock
3y2 per cent. War Stock
4 per cent. Funding Stock, 1960-1990 . . .
3Í4 per cent. Conversion Stock
4 per cent. Consolidated Stock
3 per cent. Funding Stock, 1959-1969 . . .
3.
2,293,088
62,179
99,298
1,791,262
34,039
1,922,316
348,330
14,193
Investments on behalf of the Unemployment Arrears Fund:
£
Local Loans 3 per cent. Stock
3% per cent. War Stock
3% per cent. Conversion Stock
414,718
318,176
16,445
INVESTMENT OF SUMS PAID OVER TO SOCIETIES AND INVESTMENTS BY
THE MINISTER OF HEALTH ON BEHALF OF SOCIETIES
Every approved society must invest any sums paid to the society for
investment, and must for the purpose have power to invest in any
investments in which trustees are for the time being by law empowered
to invest trust funds \ or in any stocks, mortgages or other securities
issued by any local authority within the meaning of the Local Loans
Act, 1875, and charged on any rates levied by or on the order or precept
1
Investments open to trustees under the Trustee Act, 1925, and the Trusts
(Scotland) Act, 1921, in addition to those open to the National Debt Commissioners as mentioned above, include stocks issued by the Indian, Dominion
and Colonial Governments, mortgages on real property and in certain
circumstances debentures and. guaranteed or preference stocks of railway
companies.
478
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
of that authority, or in any other securities * for the time being approved
by the Minister.
Where a Society has to realise funds to meet current expenditure it
must draw proportionately from the Investment Account and its own
investments.
The investments held by Societies themselves and by the Minister
on their behalf at 31 December 1937 are approximately summarised
as follows:
British Government securities
Indian and Colonial securities
Local Authorities' securities
Railways
Other securities
38,758,000
8,324,000
8,070,000
3,322,000
1,125,000
A detailed statement of the investments held by the Ministry of
Health on behalf of approved societies in securities selected by them was
published annually up to and including 1930 [54]. Each of the actuarial
valuations briefly indicates how the securities of the approved societies
are distributed over the main types of investment. This information
is reproduced in the following table.
TABLE XIII.
'
INVESTMENTS OF APPROVED SOCIETIES AT THE VALUATION
DATES
(in thousands of £)
At the
second
valuation
At the
first
valuation
Mortgages and loans
. . . .
British G o v e r n m e n t securities
British Local A u t h o r i t i e s ' securities
Other investments
262
14,682
1,693
1
3,100
33,656
At the
fourth
valuation
At the
third
valuation
2
1,271
1,600
5,418
42,524
2,511
5,488
2
6,692
43,435
2
2,636
4,991
i This figure represents 8,673 thousands of £ invested in War Loans and 6,009 thousands
of £ in War Bonds, other British Government securities being included under the figure
1,693
shown below.
2
Including Dominion, Indian and Colonial Government securities.
Table XIV opposite shows the total accumulated funds at the end
of each year.
§ 2. — Valuation of Investments
The value of the investments forming part of the Benefit Funds shown
on the assets side of the actuarial balance-sheet is calculated in each
case in accordance with the rules laid down in administrative regulations.
The various methods employed in the four actuarial valuations that
have so far been made will now be described.
1
The Minister has not approved any other securities beyond allowing
certain Societies to use money available for. investment for the purchase of
property for use as their own offices.
GREAT BRITAIN AND NORTHERN
IRELAND
479
TABLE XIV. — TOTAL ACCUMULATED FUNDS AT 31 DECEMBER EACH YEAR
(thousands of £)
Total at 31 December
Great Britain | United Kingdom
22,983
—
32,749
—
41,224
—
51,446
—
62,119
—
71,882
—
81,443
—
92,231
—
101,879
—
111,023
—.
118,284
—
128,369
—
128,187 •
126,519
—
127,684
—
126,925
127,991
—
129,319
—
128,906
—
128,767
—
131,272
134,736
137,823
—
Year
-
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934 1
1935 1
1936 x
—
•
i Approximate figures subject to adjustment.
In the first actuarial valuation, securities were taken at the purchase
price less the accrued interest. In the second and third valuations
investments in securities quoted on the Stock Exchange were valued
at the middle market prices (less accrued interest) on the valuation
date. The adoption of this second method showed an appreciation in
the investments due to differences between the purchase price and the
market quotation. The amount of the appreciation of securities was
shown as a separate item on the assets side of the second and third actuarial balance-sheets. In the fourth valuation the fixed-yield securities quoted on the Stock Exchange were valued at an actuarial amount, namely at
such an amount that the interest income would be equivalent to a yield of
4% per cent., appropriate provision being made in the case of redeemable
securities. In this way the appreciation in investments was estimated at
about £1,800,000, and in addition net profits of nearly £500,000 had accrued between the third and fourth valuations from the realisation of
securities.
§ 3. — Interest Rates
The rate of interest used for actuarial purposes remained fixed at
3 per cent, until 1 January 1926, since when it has been 4 per cent. The
sum credited to the societies, however, as interest on their outstanding
reserve values are still calculated at 3 per cent.
The flat rate of interest payable.from time to time on the sums standing
to the credit of societies in the Investment Account is dependent upon
the interest received and is prescribed by the Joint Committee by Regu-
480
ACTUARIAL T E C H N I Q U E AND F I N A N C I A L
ORGANISATION
lations on the advice of their financial advisers. Profits on realisation
of investments are set off against any losses on realisation and any
balance together with any undistributed interest acts as a reserve
against depreciation and tends to ensure stability in rate of interest.
The income from the sums placed to the credit of the societies in the
Investment Account was calculated on the basis of a rate of interest of
3V4 per cent, up to 31 December 1917; this rate was subsequently raised
to 4 per cent., 41/¡¡, and finally to 5 per cent. The prescribed rate of
interest payable on sums invested in the Investment Account is, since
the beginning of 1936,5 per cent, for moneys placed in the account before
1 January 1936 and 3 per cent, for othef moneys.
The yield on the whole assets of the societies, including the outstanding
reserve values which carry 3 per cent, interest only, is estimated to have
been about 4 x / 4 per cent, for the period between the third and fourth
valuations.
§ 4. — Actuarial Valuations
An actuarial valuation relating to all the approved societies in the
United Kingdom is usually made every five years under the supervision of the Government Actuary l . In the first valuation the position
of all the approved societies in Great Britain and Ireland as at 31 December 1918 was considered. The second valuation was made as at
31 December 1922 for about half of the societies covering about one-fifth
of the total numbers insured and as at 31 December 1923 for the remainder. In the third valuation the approved societies were divided into
three groups and the valuations related to the end of 1927,1928 and 1929
respectivelv1. The fourth actuarial valuation was carried out in four
stages, as àt the end of 1931," 1932, 1933 and 1934. For administrative
efficiency and economy the work of valuing the societies is spread out
so as to be carried on almost without interruption. A special report
was made by the Government Actuary on the results of each of the
actuarial valuations [30, 35, 38, 43].
Only a brief account 2 can be given here of the principles on which the
actuarial valuations are based and the methods by which they are
carried out 3 . The first step is to make an estimate year by year of the
number óf insured persons and of their distribution according to age.
The results of these estimates depend on the biometrie laws adopted and
are based on the hypothesis that these laws will continue to apply in the
future. In the light of the provisions of the legislation and the financial
basis laid down therein, the probable income and expenditure for any
given year in the future may then be calculated. By assuming an
invariable rate of interest it is thus immediately possible to obtain the
probable present value of the liabilities and expectations of each insurance
institution. Before each actuarial valuation is carried out administrative
regulations are issued, defining the bases to be followed in the course of
the operations [14],
As a result of the actuarial valuation of a society or section, an ac1
A separate valuation is made for each centralised society and for each
branch
in the case of a society with registered branches.
2
For
a fuller account cf. Bibliography,.No. 43, pp. 4 and 5.
3
Figures taken from the reports on the actuarial valuations have frequently
been quoted in these pages.
GREAT BRITAIN AND NORTHERN IRELAND
481
tuarial balance-sheet is drawn up which may show either a surplus or a
deficiency. The actuarial balance sheet of all approved societies and
their branches taken together constitutes the general actuarial balancesheet which was reproduced above 1.
The results' of the actuarial valuations also include detailed information concerning the societies showing a surplus and those showing a
deficiency.
The table below gives the principal statistics of surpluses for the four
actuarial valuations.
2nd
3rd
4th
Societies
with a
surplus
Total
amount of
surplus
(Membership)
(£)
Average
surplus
per
member
(£)
15,928,428
14,970,275
15,222,143
15,473,186
17,273,887
42,413,319
36,638,344
37,484,686
1.08
2.83
2.41
2.42
,,
„
The purpose of the valuation is not only to calculate the total surplus,
but also to determine what part of it is to be regarded as disposable.
The valuer is required, in the exercise of his professional judgment to
certify what part (if any) of the surplus may appropriately be applied
in additional benefits during the ensuing quinquennium, having regard
to the circumstances and prospects of the society. In the four valuations
the estimated disposable surplus was as follows :
Amount of surplus
Membership
of societies
with surplus
of societies
with
disposable
surplus
(a)
(«
1st valuation 15,928,428 14,370,148
14,970,275 14,726,636
2nd
15,222,143 11,588,144
3rd
15,473,186 14,733,621
4th
Fraction
Total
Disposable
surplus
Fraction
(6)
(a)
(c)
£
(d)
£
(d)
(c)
0.90
0.98
0.76
0.95
9.184,087
17,273,887
42,413,319 26,619,161
36,638,344 19,811,266
37,484,686 20,105,033
0.53
0.63
0.54
0.54
The amount of the disposable surplus having been calculated, it
remains to decide how to distribute it. If a society is certified to have
a disposable surplus, it may use it for granting additional benefits, which
are spread, as a rule, over a five-year interval beginning two years after
the valuation date. The additional benefits are granted in accordance
with rules laid down in a scheme which is drawn up by the managing
body of the society, with the help of estimates regarding the anticipated
i Table XII.
3i
482
ACTUARIAL TECHNIQUE AND FINANCIAL ORGANISATION
costs which are included in an appendix to the valuation report. The
scheme must be referred to the Central Department for approval.
T h e table below gives the total results of the four actuarial valuations
for societies with deficiencies.
1st valuation
2nd
3rd
4th
Societies
with a
deficiency
(Membership)
Total
amount of
deficiency
322,350
228,110
722,131
667,752
80,919
91,675
847.667
740,983
(£)
Average
deficiency
per
member
(£)
0.25
0.40
1.17
1.11
If t h e valuation shows t h a t there is a deficiency, this automatically
brings into play t h e mechanism of relief, which works in two stages:
• (1) recourse t o the primary relief afforded within each society by
its contingencies fund;
(2) recourse t o the secondary relief afforded by the Central F u n d .
The statistics of these operations are as follows:
1st valuation
2nd
3rd
„
4th
,,
Number of
societies
with a
deficiency
Number of
societies
covering
deficiency
out of
contingency
fund
407
134
418
292
403
126
310
244
Number of
claims to
the Central
Fund
4
8
24 !
34 2
i One from a branch society which had 85 branches in deficiency.
2 One from a branch society with 15 branches in deficiency.
The position of the contingencies funds of all the societies together
was as follows:
£
1st valuation
2nd
„
3rd
„
4th
„
6,569,000
5,825,000
5,225,000
3,254,000
T h e a m o u n t of the deficiencies in regard to which the question of
grants from the Central F u n d arose w a s :
£
1st valuation
2nd
„
3rd
„
4th
„
' . .
11,107
23,258
502,969
505,107
GREAT BRITAIN AND NORTHERN IRELAND
483
Before recourse was had to the Contingencies Funds or to the Central
Fund, special deficiency grants 1 were, in the third and fourth valuations,
credited to the societies in all cases of apprehended deficiency. At the
third and fourth valuations equality of assets and liabilities was produced in 177 and 228 units by grants of £83,445 and £250,670 respectively,
while deficiencies were reduced in 399 and 292 units by grants of
£436,962 and £695,991 respectively.
The report of the Government Actuary on the results of each valuation
also includes:
(1) an analysis and review of the sources of profit and loss;
(2) sug
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