Why Tontines are 'the iPhone of Retirement Products'
And why we need them now more than ever.
Why Tontines are back in style
When you reach retirement, you go from saving to spending & when you live a long time your savings can run out.
84% of savers want to avoid this risk by securing a lifetime income but current products are complex & charge high fees.
The simple & safe answer is to enable modern 'Tontines' which pay a monthly income for life that rises over time.
In 2018 the UK Govt. found that a return to risk-sharing pensions would eliminate the costs associated with insurance. This is because a Tontine is like a mutual society where profits go to the members rather than to the shareholders of an insurance company.
The 2019 PEPP Regulation now enables Tontine PEPPs to become the international gold standard of lifetime income pensions just in time for the 75m Europeans retiring in the next decade.
How Tontines Work
Consumers sign-up digitally to review live forecasts of future lifetime income from age 65 to 120 for any combination of contribution levels.
Upon receipt of the deposit, she/he is joined to a pool of members with similar life expectancies, e.g. same age & gender.
When each Tontine pool reaches 10,000 members, it is closed to new entrants.
The Trustees invest the assets in accordance with the PEPP Regulations, holding them in a depository or custodian bank.
Members (& their employers) can make as many contributions & top-ups as they wish.
Each month the Platform re-calculates the expected future payments taking into account investment performance & mortality.
The level of payments is not fixed or guaranteed, the Platform makes micro-adjustments to future payouts to ensure that each pool will always remains 100% capable of sustaining the lifelong payouts.
On a monthly basis, members login to their account using facial recognition which checks that the member is in control of the account & that they are still alive and eligible for payment.
When a member passes away, their payouts expire & are distributed to the surviving members causing their monthly payouts to rise over time.
As the number of members in the pool gets lower, the Platform increases the capital payouts at a rate that is expected to rise faster than inflation.
When the number of members gets quite low, typically the trust liquidates and shares the remaining capital among the surviving members.
How to Create the 'Perfect' pension
A study by 100 insurers shows Tontines are the 'perfect' solution.
According to the 'Asia Retirement Income Report' "(for consumers) the ‘perfect’…product is likely to have":
- A Lifelong Income
Our Tontines will offer monthly payouts from retirement age up until age 120+ if needed.
Each tontine is a closed pool of up to 10,000 same-age, same-gender members which contribute as much & as often as they can afford. Their payouts are proportional to the amount invested.
- The Income Increases
In a Tontine, when a member dies, their expected payouts are shared with the other members of the pool ('mortality credits') which results in the payouts for surviving members rising over time.
By design, payouts should rise faster than inflation & should rise substantially in later years as the remaining capital must all be paid out to the surviving members.
- The Capital Is Safe
The capital of the tontines is held in trust for the members & invested by globally trusted asset managers in highly conservative portfolios strategies of the kind deemed suitable for widows & orphans.
This means that the capital is safer than if it is paid to a large insurer which by their nature carry very high liabilities.
- The Fees Are Very Low
Unlike Annuities that can charge up to 30% up front & 3-5% per year in management fees, our Tontine Pensions will charge a flat 1% per year.
By reducing the fees so drastically, our Tontines offer higher monthly payouts than annuities even before mortality credits start to boost the monthly income of surviving members.
Frequently Asked Questions
When someone joins a tontine, they invest whatever portion of their savings that will allow them to relax & sleepy easy knowing that they will receive a suitable level of income for the rest of their life.
BUT, the rule of a Tontine is that if someone dies, they no longer need the money.
So if they die within a few years, even before they have received payouts in excess of their original contribution, then the balance will be shared among you and the other members of your pool.
As we say, like pets, Tontines are for life, not just for xmas.
Tontines are a great way to help you take care of your children financially.
With existing pension products, your children have to wait until you pass away to see if there is any money left over.
In a Tontine, you can use some of your savings to secure an appropriate level of lifetime income for you and your spouse, then you can immediately pass on some of the balance to your children.
In a Tontine, the assets are held in trust for the members. The trust has no liabilities and is not allowed to engage in any borrowing.
As such, the capital is safer than if it is placed on the balance sheet of an institution which faces financial & operational risks such as a bank or insurance company.
Additionally, recent Irish case law confirmed that in the event of a person (for example an Entrepreneur) being declared bankrupt by their creditors, their lifetime income from the trust is protected.
In the past, pension schemes would promise you exactly what they would pay you when you reached retirement. The problems started when people started living longer & interest rates went down, making it almost certain that they will break their promises to those that live a long time.
In a Tontine, the Trustees make constant ongoing adjustments up & down to the future payouts always making sure that there will be enough money left for all of the members.