Fair Tontine Annuity

Sabin, Michael J.

doi:10.2139/ssrn.1579932

Cited by 58 publications

(37 citation statements)

References 5 publications

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“…The expected optimal consumption as a proportion of initial wealth increased with the number of fund members. A similar pooling scheme is presented by Sabin () known as Fair Tontine Annuity, or FTA, in which “fairness” is achieved by ensuring that pool members' expected benefits did not depend on the mortality experience of others in the pool.…”

Section: Introductionmentioning

confidence: 99%

Managing Systematic Mortality Risk With Group Self‐Pooling and Annuitization Schemes

Qiao

Sherris

2012

J of Risk & Insurance

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Group self‐annuitization (GSA) schemes are designed to share uncertain future mortality experience including systematic improvements. Challenges for designing group pooled schemes include decreasing average payments when mortality improves significantly, decreasing numbers in the pool at older ages, and the impact of dependence from systematic mortality improvements across different ages of members in the pool. This article uses a multiple‐factor stochastic mortality model in a simulation study to show how pooling can be made more effective and to quantify the limitations of these pooling schemes arising from the impact of systematic longevity risk.

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Section: Introductionmentioning

confidence: 99%

Managing Systematic Mortality Risk With Group Self‐Pooling and Annuitization Schemes

Qiao

Sherris

2012

J of Risk & Insurance

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“…As Manes (1932) notes, the valuation of the original tontine was inaccurate, retirees were grouped in broad age classes, and so the contract terms were not fair in an actuarial sense. In this article, we build upon a fair tontine based on Sabin (2010) that allows participants to be of any age, of any gender, and to invest a desired amount of money 4 in the tontine. Furthermore, the tontine is revolving, which means that new members can join the tontine at any age and take on the position of deceased members.…”

Section: Tontinesmentioning

confidence: 99%

“…We model a fair revolving tontine based on Sabin (2010) that allows tontine participants to be of any gender and age, and to invest a desired one-time initial amount of money B i at tontine entrance. B i then is tied in the tontine and cannot be withdrawn before the tontine member's death.…”

Section: Tontine Modelmentioning

confidence: 99%

“…As Sabin (2010) shows, such a set of a i,k,t s exists only if no member is exposed to more than half of the total risk of the tontine and can be achieved by the introduction of a ceiling of the amounts to invest B i . Choosing N large enough additionally reduces the threat of a single individual holding too large a fraction of risky exposure of the tontine.…”

Section: Tontine Modelmentioning

confidence: 99%

“…Choosing N large enough additionally reduces the threat of a single individual holding too large a fraction of risky exposure of the tontine. Here, we implement an algorithm 11 for the determination of the set of a i,k,t s that is proposed by Sabin (2010), which approximately assigns constant a i,k,t s, irrespective of k for k = i and which provides best results for large N . In the following, we assume that the resulting a i,k,t s satisfy conditions (6) - (9) and that no member holds more than half of risky exposure on the tontine, formally meaning that…”

Section: Tontine Modelmentioning

confidence: 99%

See 2 more Smart Citations

The Modern Tontine: An Innovative Instrument for Longevity Risk Management in an Aging Society

Weinert

Gründl

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe changing social, financial and regulatory frameworks, such as an increasingly aging society, the current low interest rate environment, as well as the implementation of Solvency II, lead to the search for new product forms for private pension provision. In order to address the various issues, these product forms should reduce or avoid investment guarantees and risks stemming from longevity, still provide reliable insurance benefits and simultaneously take account of the increasing financial resources required for very high ages. In this context, we examine whether a historical concept of insurance, the tontine, entails 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. However, the tontine generates volatile cash flows, so that -especially in the context of an aging society -the insurance character of the tontine cannot be guaranteed in every situation. We show that partial tontinization of retirement wealth can serve as a reliable supplement to existing pension products.

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Longevity-Linked Annuities: How to Preserve Value Creation Against Longevity Risk

Olivieri

Pitacco

2020

Financial and Monetary Policy Studies

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Fair Tontine Annuity

Cited by 58 publications

References 5 publications

Managing Systematic Mortality Risk With Group Self‐Pooling and Annuitization Schemes

Managing Systematic Mortality Risk With Group Self‐Pooling and Annuitization Schemes

The Modern Tontine: An Innovative Instrument for Longevity Risk Management in an Aging Society

Longevity-Linked Annuities: How to Preserve Value Creation Against Longevity Risk

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