After a century of relative obscurity following US insurance industry scandals, this elegant solution to outliving your money is making a comeback in modernized form.
This guide explains how modern tontines work, why the insurance versions were banned, and how today's tontine trust structures solve the problems that gave the original concept a bad name.
What is a modern tontine?
A modern tontine is a revived, regulated version of the historical investment pool.The modern tontine is designed as a lifetime income trust which can be setup as a lifetime income trust fund or specifically for retirement. Participants pool their longevity risk by nominating each other as the beneficiaries of each other’s trusts, and the result is a lifetime income.
In practical terms, the payouts of participants who pass away earlier get redistributed to survivors, which means the longer you live, the more you receive.
Modern tontines function like a mutual society which splits the excess income between the members, using actuarial technology to offer a transparent alternative to traditional insurance products.
The core appeal is straightforward: you cannot outlive your money because your trust keeps inheriting income which is paid to you as long as you're alive.
How modern tontines differ from traditional annuities
With a traditional annuity, you hand over a lump sum to an insurance company and become one of their creditors. In return, the insurer promises monthly payments for life. The insurer profits from the difference between what they earn investing your money and what they pay you.
Modern tontines take a different approach entirely. Instead of paying for a guaranteed flat income backed by corporate reserves and shareholder profits, participants share their risk of living a long life directly with each other. This peer-to-peer structure eliminates the insurance company's profit margin, which typically results in the modern tontine providing higher lifetime income compared to annuities with similar features.
Here's how the two compare:
| Feature | Traditional Annuity | Modern Tontine |
|---|---|---|
| Nature of Obligation | Annuitant is a creditor of the Insurer | Asset backed trust |
| Income Level | Fixed by the Insurer | Based upon investment returns & member mortality |
| Fees | Higher (insurer profit margin) | Lower (no middleman) |
| Transparency | Often opaque | Fully transparent |
| Income Flexibility | Limited customization | Highly customizable |
| Fiduciary duty towards | Shareholders | Beneficiaries |
| Contributions | Often committed at inception | Flexible as per the savers needs |
| Investment Flexibility | Typically Limited | Choose your own path |
Why Tontines Policies offered by insurance companies were banned and how modern tontine designs avoid past problems
Tontines gained a notorious reputation in the early 1900s, particularly in the United States. Insurance companies selling "tontine policies" engaged in widespread fraud—misrepresenting returns and mismanaging funds.
The 1905 Armstrong Commission investigation exposed the abuses, and New York effectively banned insurers from issuing tontine policies as a result.
What went wrong with those old tontine policies?
Lack of transparency: Participants had little or no visibility into how and where funds were being invested.
Conflicts of interest: Insurance companies controlled the money and were incentivized to structure investments for the benefit of their shareholder profits.
Deferred dividend schemes: Companies promised future payouts they failed to honor.
Modern tontine trusts address every one of these historical failures. They operate as fully transparent trust structures where participants can see exactly how and where monies are invested and distributed. There's no insurance company in the middle taking a cut or making promises it might not keep.
The trust structure itself provides the regulatory framework that was missing a century ago. Professional trustees have fiduciary obligations to act in the best interests of the tontine members, not to the trustees’ shareholders.
How tontine trusts work
Each tontine trust is assigned to a tontine class of members who share similar average life expectancies based primarily on sex and age. Each member's trust balance grows through investment returns, just like any retirement account.
The real difference shows up through what actuaries call "mortality credits" or "longevity credits." When a participant passes away, their leftover balance gets redistributed to surviving members in their tontine class. This isn't morbid—it's mathematically elegant. You're essentially betting on your own longevity, and if you win that bet by living longer, you receive the winnings.
Think of it this way: if you knew exactly when you'd die, you could spend down your savings perfectly. Since you don't know, you either spend too cautiously and die with money left over, or you spend too aggressively and run out. A tontine solves this problem by pooling that uncertainty across many people who can now stop worrying about money and focus on living their lives instead.
Why individual tontine trusts offer more flexibility than collective funds
Collective investment tontine funds offer a one-size-fits-all approach. You buy into a fund with a fixed maturity date and accept whatever investment strategy the fund manager chooses.
Individual tontine trusts flip this model entirely.
You configure your own trust to match your specific needs:
Investment preferences: Select whichever trustee approved asset class you wish rather than accepting a one-size-fits-all approach
Flexible Contribution Schedules: Add money when it works for you, not according to a fund's rules
Income on demand: Begin receiving income exactly when you want it instead of waiting for a fund maturity date
Flexible Payouts: Take as much or as little of the available income as you wish, balancing the growth of your trust capital against your cash flow requirements
This flexibility matters enormously in practice. A wealthy 55-year-old planning to retire at 60 has very different circumstances compared to a less wealthy 50 year old planning to work until 70. Collective funds cannot accommodate both optimally, but individual tontine trusts can.
At Tontine Trust Europe KB, a Swedish regulated trust company, members will design their own plans through a simple app—selecting investment strategies, contribution amounts, and income start dates that fit their personal timeline. No two tontine member plans look exactly alike because no two individuals’ circumstances look exactly alike.
The role of technology in modern tontine administration
Running a tontine fairly requires precise record-keeping and transparent calculations. Historically, administrators used ledgers and actuarial tables—prone to errors and manipulation.
Today's tontine trusts leverage technology to automate the entire process. Every contribution, investment return, and mortality credit gets recorded in real-time. Participants can log into an app and see exactly how their tontine account is performing and how distributions are allocated.
This transparency builds trust in a way that wasn't possible before. You don't have to take anyone's word for how secure your income is—you can verify it yourself. At Tontine Trust, members can access their accounts through a user-friendly platform that shows exactly where their trust monies are being held and how they are growing.
Who benefits most from a modern tontine
Tontines trusts aren't necessarily suitable for everyone, but their flexibility means they can work well for lots of different situations.
The following are just some of many example use cases where a tontine trust can be suitable:
- Those without pension income: If you don't have a defined benefit pension, a tontine can replace that steady paycheck feeling
- Fee-conscious investors: If you've been frustrated by high annuity fees, tontines offer a lower-cost, better value for money alternative
- People worried about inflation: You are more interested in a steady income, often backed by debasement resistant assets, that can be expected to rise over time
- Healthy individuals: If you are expecting a longer-than-average lifespan, then tontines reward that longevity
- Less healthy individuals: You don't expect to live longer than 10 years and want to feel free to start spending your money now, but want the security of a 'Plan B' for later just in case
- Young retirees: You want to quit working now and turn your savings into a steady monthly paycheck that will last the rest of your life.
- Parents providing an inheritance: You want to pass on wealth to your children but are concerned that they may squander it and would prefer to structure it as a trust that will pay them an income for life.
Fair to say though that if you require the certainty of a fixed dollar amount of monthly income from a traditional financial institution regardless of the effects of inflation, then a traditional annuity with its insurance guarantee might be more appropriate for your situation.
How to evaluate modern tontine options
Not all modern tontines are created equal. When comparing options, a few factors stand out:
Fee structure
What percentage of contributions goes to administration versus actual retirement income?
Investment options
Can you choose how your money is invested, or are you locked into a single strategy?
Transparency
Can you see exactly how and where the assets backing your future income are invested?
Flexibility
What happens if your circumstances change and you want to adjust your plan?
Conflicts of Interest
Is your provider a fiduciary that is legally obligated to look after your interests above their own shareholder interests?
Calculate your potential lifetime income to see how a Tontine Trust might fit into your retirement plan.
FAQs
Can I leave money to my heirs with a modern tontine?
Many modern tontine designs include bequest features that weren't available in historical versions. Tontine Trusts allow you to designate a percentage of your account to provide a lifetime income for beneficiaries, while others offer premium refund guarantees if you pass away early in the accumulation phase. The specific options depend on the product structure, so it's worth asking about bequest provisions when evaluating any tontine product.
Are modern tontines legal in the United States?
Yes, though the regulatory landscape continues to evolve. The 1905 ban targeted specific insurance company practices, not the tontine concept itself. Modern tontine trusts operate under trust law rather than insurance regulations, which provides a clear legal framework. In August 2025, Presidential Executive Order 14330 expressly called for tontine-style products in retirement plans.
