LOAN FINANCE

Waikato Times, Volume 127, Issue 21231, 30 September 1940, Page 8

LOAN FINANCE

COMPULSORY ISSUE a INSURANCE COMPANIES’ PART DIFFICULT PROBLEMS (By Telegraph.—Special to Times) WELLINGTON, Monday The problem of financing their compulsory contribution to the War Loan is one which will shortly exercise the minds of many persons. During the war of 1914-18 compulsory contributions to the 5 per cent War Loan (4£ per cent tax free) were in many cases financed with the assistance of the life assurance institutions by means of endowment policies for any term up to the maturity of the stock. In addition to their own contributions, the life assurance institutions took up loan stock to the amount of the individuals’ contributions. The stock was handed to the policy-holder on the maturity of the policy. Inquiries made today went to show that none of the life assurance institutions had considered any such scheme of assistance in regard to the War Loan, 1953, announced this week by the Government. The head of one large company said there was a doubt as to whether the Minister of Finance would regard any scheme financed by them as compliance on the part of the individual with the terms of compulsion. The loan was being issued for a period of 13 years, but payment of interest at the rate of 2J per cent would not commence till October 1, 1943. Difficult To Frame Scheme The framing of any scheme by the life assurance institutions to assist contributors in the case of the present loan presented a difficult problem. No policy would be issued for a term longer than 13 years and the company would have to take up the stock in its own name. As no interest could be collected on the stock for three years, the company would have to charge any person taking out a policy a lump sum sufficient to ensure the company from 3 to 3i per cent for that period. Then there was a possibility that some individuals might pay the premiums on their policies for a year or two and then allow them to lapse, in which cases the stock would be left on the hands of the'eompany. On the other hand, of course, such persons might be classed as defaulters in respect of the compulsory provisions attaching to the issue. In any case, who was prepared to hazard an opinion as to the marketable value of such stock?