An Ideal Friendly Society
The Holloway Benefit Society, founded thirty or more years ago at Stroud in Gloucestershire, England, by Mr. George Holloway, is a remarkable institution, which has done a splendid work. It possesses many advantages over the old-style benefit society. These advantages are pointed out in detail in the course of this article. In the main, the society is so constituted that each member can look forward to a time when he himself can enjoy the fruits of his saving.
ABOUT thirty-five years ago, the late Mr. W. E. Forster, M.P., for Bradford, offered two prizes in a national essay competition, the essays to embody a plan for establishing a friendly society at once equitable and safe, and combining the ordinary advantages of a sick-club with the provision of pensions or annuities for its members in their old age. The adjudicators in that competition were the actuary of the Manchester Unity of Oddfellows, the actuary of the Foresters, and His Honour, Judge Hughes, Q.C., the author of 1 ‘ Tom Brown ’s Schooldays. ’ ’ All these gentlemen were experts on friendly society finance, and one was a lawyer. It is scarcely necessary to say that they were a sufficient guarantee of the soundness of any scheme approved by their award.
Mr. George Holloway wrote an essay on the lines indicated, and succeeded in winning a prize, and he at once put his ideal into practice by establishing the society which bears his name. Here it may be interesting to say a word about Mr. Holloway himself. He was in the truest sense of the words a self-educated, selfmade man. He rose from a humble position in life to one of influence and usefulness in Stroud, where he became a great employer of labor. For some years he represented the Stroud division of Gloucestershire in Parliament. It was his personal acquaintance with the conditions and the actual daily life of the working-
classes that set his mind upon the study of questions relating to thrift, and induced him, even before Mr. Forster intervened, to think out a scheme for founding a friendly society that should comprehend all the benefits of an ordinary sick-pay and funeral allowance society with those of a saving-bank and the provision of annuities for the members when they attain an age at which they no longer are able to work. Until his death a few years ago, Mr. Holloway continued to promote the spread of the society in the towns and villages of Gloucestershire and adjoining counties, and when he died the inhabitants of Stroud, without distinction of party or creed, united in erecting anob le statue to his memory.
The essential difference between the old society and the Holloway Society may be expressed in a sentence. In the old society the member’s contributions are added to a general fund. In the Holloway Society, each member’s contributions are entered to his personal account, precisely as if he put his money into the PostOffice Savings-Bank. , In the old society, the member’s contributions belong absolutely to the Order. In the Holloway Society, they belong to the individual member himself.
A moment’s reflection will show that that is a vital distinction. When once the member of the old society has paid his contribution into the general fund, he personally has no claim upon it except in time of sick-
ness. On reaching sixty-five years of age his contributions cease. Whenever he dies, either before sixty-five or after, his widow or other relations receive ten pounds to pay for his funeral. And that is all. In the Holloway Society, although the member’s contributions are paid into his separate account, he receives sick-pay in the same way as the Oddfellow, and on reaching sixty-five the whole of his accumulated capital, with compound interest, is paid over to him in a lump sum, or he can receive it in the form of an annuity. If he dies before sixty-five, his accumulated capital, with compound interest, is paid to his relatives. That, expressed in a general way, is the scheme which makes the Holloway Society unique amongst the friendly societies of this country.
It will more clearly bring the value of the Holloway principle before the reader’s mind if I describe a very simple example. Let us suppose that two young men join the Oddfellows’ Society when they are twenty years of age. I do not quote the Oddfellows’ Society invidiously, but only because it is the largest friendly society in the world. To these young working-men or clerks or artisans the payment of a monthly subscription to a friendly society is an important consideration. All thrift and saving involves some self-denial and membership of a friendly society imposes a severe form of self-denial because it is regular. These two young men join at twenty years of age. One of them remains a member, let us say, for fifteen years, and then dies. The other remains a member for forty years, and then he dies. All the time —the one for fifteen years and the other for forty—they pay their monthly contributions. Each receives sick-pay in case of illness. The
man who was a member for forty years paid into the society for twenty-five years longer than the man who was a member for fifteen years, and yet at the end they and their relatives were on precisely the same level. Is that fair? Is it the result of sound thrift? Does such “saving” mean “having”?
Take another aspect of the case. One of the two men who joined at twenty, we will say, continued paying his monthly subscriptions until he reached the age of sixty-five. What advantage does he reap from all these forty-five years of self-denial? True, there will be ten pounds to secure him a decent funeral when he dies, but there is not much consolation in that. For the man’s relatives a measure of prospective relief is assured, but what of the man himself? There are more than a million men subscribing to the general fund of the Oddfellows’ Society to-day. Is it for this occasional sick-pay and this paltry ten. pounds at death that each of these men is to continue throughout his working life practising what is called thrift? The Grand Master of the Oddfellows or the Chief Ranger of the Foresters tells him magnificently once a year, throughout those forty-five years, that the society possesses a fund amounting to hundreds of thousands of pounds. So it does. The individual member has paid into that fund, in the course of forty-five years nearly six hundred monthly contributions. But no part of that fund belongs to him. Has he received, or can he receive, any equivalent for his money? Does he ever calculate how much his forty or fifty years’ contributions amount to, and ask himself whether he gets, or can get, an adequate return for his “savings”?
But he has not “saved" his money.
He has paid it away. He may be a healthy man all his life and never require to “come on the duo.“ In that case the whole of his so-called investment or insurance fund yields him nothing. So far as he is personally concerned it does not matter in the least how or whether the ten pounds is spent upon his funeral.
The really serious question, then, for any young man who is thinking of joining a friendly society is whether the many years of thrift, to practise which he undertakes whèn he pays his first subscription, is to be managed upon a sound and profitable, or an old-fashioned, unsound, and wasteful system.
Now, let us see exactly what happens in the Holloway Society. At first sight it seems absurd to say that the member receives sick-pay as he requires it throughout the years of his membership, and on reaching sixty-five gets all his money back again with compound interest. No matter how absurd, or how impossible it seems, it is the fact. Members are admitted into the society from fourteen to sixty years of age as sharemembers. Up to thirty years of age a one-share member pays a penny a day; that is, twTo shillings and fourpence per lunar month. From the age of thirty years onwards he pays an extra halfpenny per month for each year beyond thirty. That is to say, between thirty and thirty-one, he pays two shillings and fourpence half■ penny per month; from thirty-one to thirty-two he pays two shillings and five pence; from thirty-two to thirtythree, two shillings and fivepence halfpenny; and so on, increasing one halfpenny per month for every year up to sixty-five.
The reason for the payment of these extra halfpennies is very simple, but very important; and it is
because the old friendly societies take no account of it that their basis is unsound, and, as is notoriously the fact—admitted many times by their actuaries and Grand Masters—that a large proportion of their lodges are not in a position to meet their liabilities.
The simple fact is this: as a man advances in years his liability to sickness increases. Happy is the man who escapes that liability. But the average man does not escape it. The average man is ill on an increasingly greater number of days in every year beyond thirty. Mr. David Williams, a well-known friendly society actuary, summarizes the statistics on this important matter in his book on Friendly Societies, from which I quote one paragraph: “If we refer to ihe Registrar of Friendly Societies’ Tables (Table 1) we shall find that pach member between the ages of eighteen and thirty-one experiences on an average a trifle less than one week’s sickness during each year. At age forty—that is, between a man’s fortieth and forty-first birthday—each member experiences on an average one week and three days’ sickness. At age fifty this has increased to two weeks and one day, at age sixty to four weeks and two days, at age seventy to twelve weeks and two days. ’ ’
This increasing sickness, of course, means a gradually increasing drain upon the sick-fund on the part of the older members, and if no provision is made for meeting that liability on an equitable basis, it naturally follows that the result to the general body of members at any given time must be inequitable. The plea that friendly societies exist for the purpose of mutual help voices a noble and beautiful sentiment, and sentiment is a mighty factor in the
world’s progress. Life would be dreadfully prosaic without it. But in a matter of such supreme importance to working-men as the employment of their savings, sentiment ought to some extent to be governed by business-like considerations. On behalf of the old societies it is urged that the young members will in time become old, and will require the help of the young; they therefore, whilst young, should help the old. The old proverb says, ‘God helps those who help themselves,’ and the Holloway Society has adopted that as its motto, without, as I think, denying any of the claims of sentiment or losing sight of the value of co-operation ; whilst it has at the same time assured constant stability for its fund, because the demands upon it can never be greater than it is able to bear. The slight extra payment per annum covers the liability to increasing sickness in the case of every individual member, and therefore places all the members, young and old, upon a footing of exact equality. This important principle is lacking in the old societies; hence all the financial and other trouble involved in requiring the young members to provide for the old, and in the accumulation of a huge fund upon which individual members have no personal claim.
•,The penny per day which the oneshare member pays amounts to one pound ten shillings and fourpence per annum. It is the experience of all friendly societies that up to thirty years of age the sum of about five shillings per annum suffices to meet the average cost of sickness per member and cover reasonable management expenses. It follows, therefore, that in the Holloway Society, after this pro rata deduction has been made, the one-share member at the end of his first year has about one pound
five shillings remaining to his credit in the savings-bank department. Instead of being put into a big moneybox, upon which he can make no claim, it is entered to his name in the society ’s books, and remains earning compound interest. So each year’s liabilities are made up separately, end each succeeding year begins with a new slate. Every member knows from year to year how his individual account stands; and those who are not acquainted with the accumulative powers of compound interest would be astonished at the way in which thrifty saving multiplies itself.
It may possibly appear that the Holloway Society is an expensive society, but really the extra payment is very small, and the rules of the society provide for making it fall lightly. Besides, it must be remembered that every penny unexpended in sick-pay and management comes back to the member at the annual appropriation, and is added to his savings-bank account. The interest paid upon these savings in dozens of towns in Gloucestershire and Wiltshire, and in Birmingham and its surrounding district, has never, I believe, fallen below 4 per cent.
The member who pays a penny a day is, as I have said, called a oneshare member. In sickness' he receives ten shillings a week for six months, and after that five shillings a week. He may subscribe for two shares, which would be twopence per day, in which case he would receive one pound per week in sickness; if he took three shares and paid threepence a day, he would receive thirty shillings a week. If he cannot afford one share (two shillings and fourpence per month) he can take half a share, and pay a halfpenny a day or one shilling and twopence per month, in which case he would insure
five shillings a week sick-pay. The maximum number of shares any member can subscribe for is three, but below that he can increase or reduce his shares at any time according to his means. A statement of his shareaccount is furnished to the member at the end of each financial year, so that he can see precisely how he stands. He grows richer from year to year, and the tangible results of his thrift are ever before his eyes. In all the Holloway Societies the accumulated funds are invested upon mortgage of freehold property or in securities specified in the Friendly Societies Acts.
Recognizing that the payment of the additional halfpennies per month after thirty years of age might in some cases impose upon a member a strain which sometimes he could not bear, Mr. Holloway made provision in his rules for allowing the member’s monthly contribution, from his fortieth birthday onwards, to remain at two shillings and ninepence (according to the table) and for taking the member’s additional halfpennies from his interest account. In the Birmingham district a new system has been adopted under which, by paying a lump sum at joining, all the benefits of the monthly-contributing member may be assured. It is an improvement upon Mr. Holloway’s plan, and has secured the approval of very high actuarial authority. But it is somewhat complicated, and I will not destroy the simplicity of this article by explaining it in detail. It does not affect the fundamental principles of the society.
Another important provision in the Holloway scheme is that a member can at any time withdraw part of his accumulated fund, and still enjoy all the benefits of membership. It sometimes happens that ten or twenty
pounds is of the utmost importance to a man at a pinch, and many members have found this rule of the greatest assistance. If a member wishes to leave the society altogether, he can take out the whole of his accumulated capital with the exception of two years’appropriation. This forfeiture is a desirable precaution, because it is to the interest of the society and of the individual that the accumulated funds should remain as nearly as possible intact. But there is the provision in case of necessity.
In his work on The Endowment of Old Age, Mr. Booth says that “the certainty of the enjoyment of saving makes thrift attractive.” That is perfectly true. To the Oddfellow and the Forester such attraction is denied. The results of his thrift have been added to the general fund of the Order, upon which he as an individual has no claim. The member of the Holloway Society can watch the accumulation of his savings in the same way as a modern beekeeper can watch, through the glass roof of his hive, the thrifty accumulation by his stock of bees. In the district of Stroud alone the accumulation fund is approaching, if it has not already reached, a total of one hundred thousand pounds. Every one-share member who has been in the society for five years now has standing to his credit six pounds eighteen shillings and twopence; if for ten years, the amount is fifteen pounds eleven shillings and eightpence; if for fifteen years, twenty-seven pounds six shillings and a penny ; if for twenty years, forty-three pounds eleven shillings and eightpence. So the individual accounts go on increasing. In forty years the member’s capital must rise to one hundred and twenty pounds thirteen shillings and sevenpence, and in fifty years to two hundred and eight
pounds one shilling and eightpence, which is actually a larger sum than he will have paid into the society in monthly contributions. That sum of two hundred and eight pounds is worth all it looks to a working-man at sixty-five years of age, and if it be said that such a sum might not last as long as a man would want an annuity or old-age pension, the reply is: Well, perhaps not; but iwo
hundred and eighty pounds one shill-
ing and eightpence in the hand is worth more than any amount of State-aid in the clouds of a general discussion upon the question of how the State is going to provide it. I understand that considerably more titan one thousand pounds has already been paid out in Stroud alone to members who have reached sixty-five years of age. The members of the old societies on reaching sixty-five do not receive a penny.