Tontine Pensions

INTRODUCTION:

Tontines are investment vehicles that can be used to provide retirement income. A tontine is a financial product that combines the features of an annuity and a lottery.1 In a simple tontine, a group of investors pool their money together to buy a portfolio of investments and, as investors die, their shares are forfeited, with the entire fund going to the last surviving investor. Over the years, this “last survivor takes all” approach has made for some great fiction.2 For example, in an episode of the popular television series MAS*H, Colonel Sherman T. Potter, as the last survivor of his World War I unit, got to open the bottle of French cognac that he and his buddies bought (and share it with his Korean War compatriots).3 On the other hand, sometimes the fictional plots involved nefarious characters trying to kill off the rest of the investors to “inherit” the fund.4