Posted on Oktober 12, 2021
Unfortunately, the American tontines of the late 1800s did not only distribute the funds to other funders in the event of death while waiting. Policies could also expire – with a total loss to the investor – if he/she was ever in arrears with only one outstanding payment (and since the tontines were bundled into dividends from permanent life insurance, this meant that life insurance would have been lost as well). In other words, Tontin policies would only pay the accumulated dividends of life insurance policies at the end of 20 years if the person survived and made every insurance premium payment on time on the way (and didn`t have a disruptive financial/life event that could lead them to miss a payment). The bad news is that this requirement of „perseverance“ has put extreme pressure on investors/policyholders to continue to make timely payments for insurance/tontin policies. The good news is that even with a moderate decline rate, in addition to potential deaths, a tontine with a base yield of only 4% per year could offer an internal return of more than 10% for those who have stopped throughout the period! A tontine clause (or increment clause, as it is also called) is used to avoid the hereditary rights of children enshrined in French law, so that no part of the property is transferred to them during their lifetime. The main difference from the point of view of pensions and single-premium emergency pensions is that the Tontine does not pay a mortality credit before (and pending) deaths. Instead, survivors do not have mortality credit until some members of the Tontine Pool have actually died. Suzanne Shu, an associate professor at UCLA`s Business School, argues that such an agreement may seem more psychologically equitable. Retirees often refuse pensions because they worry about not living long enough to suspect the money. This is the nightmare scenario: if someone dies the day after buying a pension, the insurance runs away unscathed from the cash.
In a tontine, this money is passed on to finance the retirements of other people. (Depending on your psychopath, this is either a positive characteristic or an incitement to murder.) Overall, the question of whether Tontin is legal in the United States remains open. As has already been said, there are now only two states in the United States (Louisiana and South Carolina) that explicitly prohibit „tontines“ in their statutes and, at the same time, TIAA-CREF has been offering a tontine-type retirement plan for 60 years. It can therefore be said that tontine-type investments are legal as long as the word „tontine“ is not used in their name or offered in Louisiana and South Carolina. .