April 10, 1923

LAB

William Irvine

Labour

Mr. IRVINE:

After the explanation of the Prime Minister, with the consent of the seconder and of the House I withdraw my motion.

Amendment withdrawn.

Main motion agreed to and the House went into Committee of Supply.-Mr. Gordon in the chair.

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DEPARTMENT OF LABOUR


Labour-salaries, $231,735; contingencies, $45,500.


CON

William Alves Boys (Whip of the Conservative Party (1867-1942))

Conservative (1867-1942)

Mr. BOYS:

Perhaps the minister could

now supply the information regarding annuities that he promised just before we rose last night.

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LIB

James Murdock (Minister of Labour)

Liberal

Hon. JAMES MURDOCK (Minister of Labour):

The question was asked yesterday,

what proportion of the amount given in the statement that had been made was received for annuities on a three per cent basis, and what proportion on a four per cent basis, and what would be the disbursements for the same periods. The answer should have been that a four per cent interest rate has obtained since 1908, when the act came into force. Where an annuitant dies before the annuity becomes payable and the contract provides

Supply-Labour-Annuities

for the return of the payments made, interest thereon at the rate of four per cent is also allowed, this rate having been raised under an amendment to the act in 1920, from three to four per cent.

The question was also asked, what were the total receipts and disbursements on annuities account since the organization of the branch. These are as follows to the 31st of March, 1922. The interest on account for the year 1922-1923 and payments to annuitants for the same period are not yet completed. I have here a statement under the caption "Dominion government annuities, progress of fund from year to year." .

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CON

William Alves Boys (Whip of the Conservative Party (1867-1942))

Conservative (1867-1942)

Mr. BOYS:

Perhaps other members want

that information, but as far as my question was concerned I was not anxious for that. I wanted to know the total receipts and total disbursements. I am aware that there would still be outstanding liabilities in connection with some annuities.

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LIB

James Murdock (Minister of Labour)

Liberal

Mr. MURDOCK:

The total receipts since

the act came into force are $5,660,000. The interest amounts to $1,529,951.14, or a total of receipts and interest of $7,189,951.14. The payments to annuitants for the entire period amount to $2,184,526.72, leaving a balance as of date of $5,005,424.42.

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CON

William Alves Boys (Whip of the Conservative Party (1867-1942))

Conservative (1867-1942)

Mr. BOYS:

There are certain obligations which belong to the department, I presume, in connection with annuities which were placed, the annuitants having died but the annuities being payable to others, for a period of five, six or seven years, the balance of a ten or twenty year period as the case may be.

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LIB

James Murdock (Minister of Labour)

Liberal

Mr. MURDOCK:

I am not sure-

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CON

William Alves Boys (Whip of the Conservative Party (1867-1942))

Conservative (1867-1942)

Mr. BOYS:

Perhaps I can make myself plainer. As I understand it, there is a system by which an annuity may be purchased and if the annuitant dies within ten years the annuity is still payable to persons named for the balance of the period whatever it may be -generally ten years, I imagine. To that extent there would be outstanding obligations against this surplus of nearly $5,000,000. To ascertain whether or not the branch is paying one would have to know something of these outstanding obligations. If they are not very extensive one would be forced to the conclusion that the time, perhaps, is ripe now when these annuities should be placed on a five per cent basis-which the minister has in contemplation-rather than on a four per cent. That is, if it is not the intention of the department to try and make money out of this particular branch of the service-and I understand such is not the intention of the department.

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LIB

James Murdock (Minister of Labour)

Liberal

Mr. MURDOCK:

I think I have here the information that is desired by the hon. gentleman: An annuitant might have in hand a few hundred dollars which he would like to apply on account of the purchase so as to reduce the annual payments thereafter to be made; or he might wish to pay a specific sum, say $100 or $200 a year, to secure at a stated age the annuity which such payments would give him; or, if he is a young married man, the class of annuity which should interest him most would be a deferred last survivor annuity on the lives of himself and wife jointly, to be purchased by monthly payments, with a return to their heirs of the purchase money and interest if both should die before the annuity became payable; or the annuity desired might be an immediate annuity purchasable for cash on the lives of two persons payable so long as both lived, with a certain amount to the survivor; or it might be the kind of annuity in regard to which the hon. member for Simcoe said he had interviewed the superintendent, namely, an immediate annuity on the lives of two persons, the annuity to be paid to the purchaser so long as he lived, with the full amount to the survivor so long as he or she lived; the rates for all of which are not printed for distribution, and have to be calculated by the actuarial staff as required. It would be the work of years to prepare the tables w'hich would be required to meet all such cases.

Annuities are not being sold for gain, and it was never intended that they should be. Whether the government might or might not lose a few thousand dollars by such a proposition would seem to me to be a matter of secondary importance to that of encouraging our people to be thrifty and saving, and of furnishing them with the facilities for investing their money with absolute security. The rate of interest on which annuity values are calculated is, as I have previously stated, 4 per cent. That was the rate fixed in the regulations of 1908, and the rate has obtained ever since. Where an annuitant dies before the annuity becomes payable, and the contract provides for the return of the payments made, interest thereon at the rate of 4 per cent is also allowed, the rate having been raised under an amendment to the act in 1920 from 3 to 4 per cent; but in order to secure this additional interest the premium rate had also to be increased. Does this give the information desired by my hon. friend?

Suppl y-Labour-A nnuities

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CON

William Alves Boys (Whip of the Conservative Party (1867-1942))

Conservative (1867-1942)

Mr. BOYS:

The minister has given me most of the information but I think one point still remains to be cleared up. There appears to be to the credit of this branch a surplus, which has accrued during the fourteen-year period, of $5,005,425. Now, that would be profit with the one exception that you must deduct from it the obligations connected with the two plans that the minister has just referred to. Is it not possible to find out to what extent money should be retained to take care of those obligations-the difference between the five millions and that being really what this department has profited during the fourteen years-and if it is anything like the sum of $5,000,000, I think it would be an easy matter to come to the conclusion that the department has now reached the point when the rate of interest should be five per cent. I believe myself there is a great field for this security and the government requires money. It might as well get the money this way and if the people of Canada can be given a reasonable return for their money I should think they would take advantage of it. Four per cent is certainly not a satisfactory or productive return. But the government can make it productive. Let us have a little publicity, let all the postmasters throughout the country have this information for the benefit of those who seek it, and I believe that instead of reaching one million dollars-and I am glad to know that last year the receipts of this branch amounted to that sum-if the return to the people be raised the government will get a very considerable sum of money and this will prove an excellent and safe investment as against old age.

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CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

I believe that the real difficulty we are all in is that we do not know what we can do. I do not know that the minister can tell us where we are and therefore what we could do in moving towards a more liberal policy having regard to annuities. Before we get to that it is, of course, necessary to know what we have been doing. As I understand it-I was not here when the figures were last discussed-we now have a credit of some $5,000,000. Of course, that credit of five millions may mean a lot of money or may mean nothing at all; it may mean a very large profit or it may mean an absolute loss. But the minister has his tables worked out on the regular actuarial expectation of life, on a four and on a five per cent basis, and those tables will tell him just what reductions have to be made in connection with that sum of money. The House ought to know whether we are making or whether we

are losing; and if we are making money, why we might not in future make a little less in order to earn a great deal more in. ease of the Department of Finance. It is not a matter of guesswork, it is a matter of actuarial computation. The minister must have computations in the department. Perhaps he can tell us now just what actuarial reserve out of that five millions is necessary to meet the claims, based on the usual expectation of life, from the two classes.

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LIB

James Murdock (Minister of Labour)

Liberal

Mr. MURDOCK:

I am very sorry but I do not think that the information requested by the hon. gentlemen has ever been compiled in connection with the Annuities branch of the service. My hon. friend (Sir Henry Drayton) refers to what the Department of Finance might do in regard to this matter. I may say that the matter of increasing the allowance from a four to a five per cent basis has been under discussion for some time. Those authorized to consider and deal with these matters in the Department of Finance have indicated the belief that it might not be altogether safe to adopt the 5 per cent basis because of the possible loss that might accrue. During the last year I understand that, on the 4 per cent basis, the Annuities branch broke a little better than even, with, I think, $2,800 to the good, but I do not think the matter has been gone into by anyone to determine just what the profit or loss has been. I think the statement that was made a little while ago that it should not be considered altogether on that basis is a sound one. Personally, I agree with the hon. member for Simcoe (Mr. Boys) who suggested that if the rate of interest were made sufficiently attractive we would enlarge the scope of the department, would not lose any great amount of money, even on that basis, and would have the use of a great deal of money invested by the citizens of Canada.

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CON

William Alves Boys (Whip of the Conservative Party (1867-1942))

Conservative (1867-1942)

Mr. BOYS:

I have not yet got what I want. Perhaps the minister cannot give it to me. Has he under advisement the question of whether the rate should be raised to 5 per cent or not, and what information is it he is considering? He finds that at this period he actually has a surplus of $5,000,000 odd. That is profit, with the one exception that he must take a sufficient sum of money to take care of the outstanding obligations to which he has referred. If we could only find out from the actuary what sum of money would be required, we would go a long way towards finding out whether or not this annuity system could be placed on the 5 per cent basis.

Supply -Labour-A nnuities

I wish to refer to another matter. We have in Ontario a savings bank carried on by the government of Ontario.

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LIB

William Stevens Fielding (Minister of Finance and Receiver General)

Liberal

Mr. FIELDING:

Not a bank.

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CON

William Alves Boys (Whip of the Conservative Party (1867-1942))

Conservative (1867-1942)

Mr. BOYS:

I forgot really what name 1 have seen on the outside of the various offices. It is a provincial savings bank.

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LIB

William Stevens Fielding (Minister of Finance and Receiver General)

Liberal

Mr. FIELDING:

The name "bank" cannot be used for the Ontario business.

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CON

William Alves Boys (Whip of the Conservative Party (1867-1942))

Conservative (1867-1942)

Mr. BOYS:

I appreciate that, and I am in error in using the . word " bank," but as far as the public are concerned, they view it in that way. It is a provincial savings institution. There is one not very far from the Parliament Buildings. We have them in Toronto and elsewhere in the province. We can take our money and place it in one of these institutions. With regard to the annuity of $1,000 which has been mentioned, the cash pay- . ment asked by this branch for that annuity was $15,000, which was estimated on a 1 per cent basis. How can tire branch expect to do much business, when the same individual who might want an annuity could deposit his $15,000 in this provincial institution, get 4 per cent as long as he wanted it, and at the end of the period get his $15,000 back whereas by the system now in vogue in the Annuities branch, he would get $1,000 a year for his expectation of life, as long as he lived, and if his wife survived she would get it afterwards, for a period at the outside of 15 years. At the end of that time the $15,000 would be gone. If a man has $15,000, is he going to hesitate as to whether he should place it on deposit at 4 per cent, having the province of Ontario behind him, knowing he can get that rate of interest upon his money, and have the $15,000 at the end of the period, or purchase an annuity? I submit he would not hesitate very long. If annuities were placed on a 5 per cent basis, they would be attractive, and he would accept it; the government would get the benefit of the money, and the annuitant would be protected in his old age.

I want to ascertain how much of that $5000,000 cash on hand should be retained to take care of outstanding obligations. I under-[DOT] stand there is a plan whereby an annuity may be purchased on a ten-year basis. It will be payable to the annuitant for his or her life, but if he or she dies before the expiration of the ten-year period it will still be paid to whomever may be designated for the balance of the term. It stands to reason that a sum of money must be held to guard against these payments. There is also the other feature that annuities are purchased by laying aside certain annual payments to take care of them, and that money is on hand and must

be kept on hand to take care of that situation. So far as I know, outside of these two features, this entire $5,000,000 balance-a'large sum, in view of the business that is done, is on hand. If the minister has not the information, I wish he would get it so that we may be able to form our own opinion as to whether the time is not ripe and overdue when annuities should be placed on a 5 per cent basis.

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LIB

James Murdock (Minister of Labour)

Liberal

Mr. MURDOCK:

In considering the $5,000,000 surplus, you must take into consideration that there are 5,643 annuitants who stand to benefit proportionately from that, and, therefore, it cannot be regarded as a $5,000,000 surplus.

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April 10, 1923