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Market story

The pension where the last survivor wins

Published .

The tontine insured against a misfortune nobody expects: living too long. The idea is credited to the Neapolitan banker Lorenzo de Tonti, who devised it in France in 1653. Participants paid money into a common pot and received interest, and when one of them died, their share was redistributed among the living.

Treasuries loved such loans: France ran state tontines until 1759, and the English government held one of its own in 1693. Subscribers paid in, and survivors collected. The fewer neighbours left in the pot, the fatter the payouts, and survival became a lottery with living tickets.

An Australian actuary called tontines an immoral contract that rewards murder. The restrictions in the US came from something else: after abuses by American insurers, the Armstrong Investigation limited some forms of tontines there. The EU’s new pan-European pension legislation explicitly provides for pension products based on the tontine principle.

Source: Wikipedia, Tontine

Story archive

All issues in order, newest first.

  1. How a goatskin bond outlived the guilder and pays in eurosOf the tens of thousands of manuscripts in Yale’s rare book library, one still earns interest.
  2. The pension where the last survivor winsThe tontine insured against a misfortune nobody expects: living too long.
  3. How a pact of 24 brokers became the New York Stock ExchangeThe world’s largest stock exchange began as a cartel: 24 brokers promised each other to hold their commissions.
  4. How “Bogle’s Folly” grew into trillionsThe first index fund for retail investors raised just $11 million, and competitors dubbed the venture “Bogle’s Folly.”
  5. How two traders cost the exchange its onionsA sack of onions was once worth less than an empty sack.

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