The usual form of contract provides for the payment of the sum assured if the child survive the selected period with a death benefit of—

(a) A return of all the premiums paid, or

(b) A return of all the premiums paid accumulated at a low rate of interest, say, 2 %.

In view of the nature of the death benefit and the fact that the commission (usually 2½% of the premiums) and expenses are small, it is usual to ignore mortality and charge a premium based on interest only, the net 3 % rate being fairly common. Expenses and profit are derived from surplus interest. Sometimes a procuration fee of 10s. is payable, with renewal commission of 2½ %, and in such a case the question of adjusting the rates must be considered, particularly if the death benefit includes interest.

The most convenient way of explaining the special features of Collecting Friendly Societies is, I think, by contrasting them with (I.) Other Friendly Societies, and (II.) Industrial Assurance Companies.

Under Section 8 of the Friendly Societies Act, 1896, a comprehensive list of the objects of Friendly Societies is given, but the Collecting Friendly Societies have practically limited their objects to Death Benefits and Endowments. This limitation is important, as it accounts to a large extent for the characteristic features of Collecting Societies.

In the Friendly Societies Act there is a provision that all expenses of administration are to be met entirely out of a separate Management Fund, but there is no restriction as to the amount of that fund nor how it is to be built up. All Friendly Societies are allowed to make their own arrangements in their rules.

It is easiest to understand the subject by approaching it arithmetically and remembering that in practice tables give values of n V for integral values of n.

Throughout these notes it is assumed that n V = n V (m) if n is integral. The error cannot exceed 1 per cent, of the true value where the entry age is 35, or 3 per cent, where the entry age is 60. As mentioned in the Text Book, Part II., p. 346, the maximum percentage error arises when m becomes infinite and is one-half of the net annual premium per cent, for Whole Life Assurances. For Endowment Assurances the differences are very small, increasing with the maturity age.

The present Estate Duty was imposed by the Finance Act, 1894, in place of other previously existing Death Duties, and is payable on all property (with a few exceptions), real or personal, settled or unsettled, which passes on a death after 1st August, 1894.

Under Section 8 (3) the Executor shall specify all the property in respect of which Estate Duty is payable, and shall be accountable for the Estate Duty in respect of all personal property of which the deceased was competent to dispose.

Under Section 8 (4), where the Executor is not accountable, every Trustee, Guardian, Committee, or other person in whom any interest in the property or the management thereof is at any time vested, shall be accountable for the Estate Duty.

All the larger Friendly Societies and many of the smaller ones have organised separate sections for administering the benefits of the Act to their Members and to others insured under the Act. In some Societies this course was opposed on the ground that the admission of a new class of lives might lead to an unfavourable sickness experience in the State Section, and that unfavourable results in that Section might react on the prosperity of the voluntary side of the Society. But the consideration which outweighed all others with the majority of Members was that the Voluntary Sections of Societies would in future be largely recruited from their State Sections, and that any Society which did not organise a State Section would be likely to die out from lack of new Members—a prospect very distasteful to Members of Friendly Societies, even though it might not involve any pecuniary loss to them.