Frequently Asked Questions by Savers
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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 monthly income.
So if a member dies within a few years, even before they have received payouts in excess of their original contribution, then their remaining payouts will be shared among the surviving members of that pool.
These 'tontine credits' received by surviving members from members that have passed away enable the tontine to continue paying monthly incomes to even the very longest lived members.
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 now and then you can immediately pass on some of the balance to your children to enable them to pay university fees, buy a house or start a business.
In the past, pension schemes would promise you exactly what they would pay you when you reached retirement.
But then people started living longer & interest rates went down, making it almost inevitable that many 'Defined Benefit' schemes will now have to break their promises if they are to avoid total bankruptcy.
In a Tontine, the Trustees make constant ongoing micro-adjustments up & down to the expected future payouts which ensures that there will always be enough money to maintain the lifetime income payments.
Furthermore, the very fact that the Trustees have the ability to vary these future payments means that the Pension Fund is not forced to invest only in government bonds offering zero interest but can also invest in long term infrastructure funds etc. which are capable of providing a far better level of income for the pension scheme members.
In a Tontine, the assets are held in trust for the members. The Tontine 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.
The last major industry-wide insurance sector collapse happened 150 years ago in the US which saw almost every insurance firm wiped out. The only survivors of this 'extinction event' were those operators also involved in the Tontine pensions industry.
The Trustees ensure that all of the monies in held in trust for the members in a segregated account at a custodian bank or depositary bank.
The monies can only be invested in accordance with the Pensions Act which is based upon the European Pension scheme directives.
Our pension scheme rules however go one step further by adhering to the new investment standards set down by the EU PEPP Regulations which stipulate that the majority of the scheme assets must be invested in regulated investments with a major focus on infrastructure and ESG compliant investments.
Additionally, the TontineTrust scheme is in the process of appointing a globally respected depositary bank which under law will also be responsible for monitoring that each investment by the Trustees adheres to the regulations.
For further information, see: https://www.pensionsauthority.ie/en/news_press/news_press_archive/faqs_on_investment_regulations.html
FAQs for Pension Issuers
Tontine pensions provide true lifetime income pensions to the members but in this case the sponsors have zero exposure to the risks or liabilities that came with defined benefit (DB) pensions.
Our tontine pensions are more like collective defined contribution (CDC) pensions which have a 'defined ambition' to pay members 'target returns' which can adjust up or down over time depending on investment performance and mortality experience.
No. Not unless the employer is legally or contractually obliged to pay into the pension on their employees' behalf.
Our standard pensions are personal pensions which can accept contributions from members and/or employers.
For organisations with large numbers of members, we offer white-labelled PEPPs 'Powered by TontineTrust'.
In theory, yes. However, this subject to the rules in your country and the specific regulation and funding status of your existing schemes.
We work with Westerbrink who are one of the top pension law consultancies in Europe and we would be happy to discuss how we can help offer an alternative scheme for your members.