Memoranda presented to the Royal Commission.

  • Great Britain. Royal Commission on Population.
Date:
1950
Catalogue details

Licence: Public Domain Mark

Credit: Memoranda presented to the Royal Commission. Source: Wellcome Collection.

    125/128 (page 119)
    2. A further adjustment over and above the interest adjustment would ibe required if a capital sum, which should probably not be allowed to exceed one-half of the total endowment due, were payable at or. near birth. It would usually be a hardship and sometimes a little brutal to ask a parent to refund money in the event of the early death of a child. To cover this contingency there should be deducted from the total endowment, in the alternative providing an initial sum, an amount equal to what would actuarially be required to insure the child’s life for the diminishing amount by which the money advanced exceeded what would have been paid had the endowment been spread in equal annual instalments. If this were done, there would be no need to ask for any money back should the child die. APP EN DT xX PV A SPECIAL CASE OF WANGLING 1. As accounts are squared on the assessment day at the end of the expecta- tion period, the only element of uncertainty is in the regard to the future course of income between that and the sixty-sixth birthday. As income is imputed to a man on the basis of his last recorded income (or its average in the last 3 or 5 years)—at this final date we should certainly choose the 5 year average—Sir Hubert Henderson suggested that a man might acquire a fictitious income, e.g., by the transfer of investments, while endowments were still coming in and relinquish it when the expectation period was over. Thus a man at £800 p.a. might persuade a rich relation to transfer to his name £6,000 in shares thus raising his income to £1,000 p.a. on the understanding that he would surrender the dividends and hand the shares back at the end of his expectation period. Thus he would have £1,000 p.a. imputed to him for the remainder of his “expectation of life” below 66, whereas in fact once the end of his “expectation period” was passed he would only pay contributions on £800 p.a. | 2. The possibility of such wangles must be admitted. But in considering whether they would attain dimensions of statistical significance, it is neces- sary to look at the matter more closely. 3. Sir Hubert Henderson referred to the willingness of members of a family to transfer investments among themselves if any tax gain was likely to result. But it must be remembered that such transfers are usually among fairly wealthy people all of whom are financially safe. If the recipient is not quite safe there is immediately fairly strong resistance to such adjustments. 4. Now in the first place a gain can only accrue from the manoeuvre if the recipient’s income is and is expected to remain for the rest of his life substantially below £1,000 p.a. There will not be much gain if he has less than 4 or 5 children. If the principle of the five year average, referred to in paragraph 1 above, is adopted, as it should be, the capital will have to be transferred unconditionally for five years if it is to have its full affect on the endowment of one child and for longer if it is desired to affect more. Let us suppose there are 3 dependent children, numbered 3, 4 and 5,—I begin with 3 because No. 2 only draws a half rate—and that to get the full benefit the capital has to be transferred for 10 years, beginning, say, when the father is 45.(*). 5. What is the proposition? A man of 45 with £800 a year and no expectation of his income rising above that, and 5 children, 3 of them under 13 years of age, has to ask a rich relation to make over £6,000 unconditionally