The modern tontine : an innovative instrument for longevity risk management in an aging society

  • We investigate whether a historical pension concept, the tontine, yields enough innovative potential to extend and improve the prevailing privately funded pension solutions in a modern way. The tontine basically generates an age-increasing cash flow, which can help to match the increasing financing needs at old ages. In contrast to traditional pension products, however, the tontine generates volatile cash flows, which means that the insurance character of the tontine cannot be guaranteed in every situation. By employing Multi Cumulative Prospect Theory (MCPT) we answer the question to what extent tontines can be a complement to or a substitute for traditional annuities. We find that it is only optimal to invest in tontines for a certain range of initial wealth. In addition, we investigate in how far the tontine size, the volatility of individual liquidity needs and expected mortality rates contribute to the demand for tontines.

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Author:Jan-Hendrik WeinertORCiDGND, Helmut GründlGND
Parent Title (English):European actuarial journal
Place of publication:Berlin ; Heidelberg
Document Type:Article
Date of Publication (online):2020/12/01
Date of first Publication:2020/12/01
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2023/01/17
Tag:Aging society; Annuities; Asset allocation; Life insurance; Retirement Welfare; Tontines
Page Number:38
First Page:49
Last Page:86
Research support from the Research Center SAFE, funded by the State of Hesse, initiative for research LOEWE and from the Deutscher Verein für Versicherungswissenschaft e.V. is gratefully acknowledged. Open Access funding enabled and organized by Projekt DEAL.
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoCreative Commons - Namensnennung 4.0