Tontines: A Practitioner's Guide to Mortality-Pooled Investments

Fullmer, Richard K.

doi:10.2139/ssrn.3485774

Cited by 5 publications

(5 citation statements)

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“…We give a brief overview of modern tontines in this section. We restrict attention to the case of an individual tontine account (Fullmer, 2019), which is a constituent of a perpetual tontine pool. Consider a pool of m investors, who are alive at time t i−1 .…”

Section: Intuitionmentioning

confidence: 99%

“…A recent innovation in retirement planning involves the use of modern tontines (see, e.g., Donnelly et al, 2014;Donnelly, 2015;Milevsky and Salisbury, 2015;Fullmer, 2019;Weinert and Gründl, 2021;Winter and Planchet, 2022;Milevsky, 2022). In a tontine, the investor makes an irrevocable investment in a pooled fund for a fixed time frame.…”

Section: Introductionmentioning

confidence: 99%

“…Our focus in this article is on individual tontine accounts (Fullmer, 2019), where the investor has full control over the asset allocation in her account. We also allow the investor to control the withdrawal amount from the account, subject to maximum and minimum constraints.…”

Section: Introductionmentioning

confidence: 99%

“…If the investor survives, then she will earn mortality credits from those members who have passed away, in addition to the return on her investment portfolio. Note that in some tontine formulations (e.g., Donnelly et al, 2014), there is a final mortality credit paid to the estate of the deceased, while in other formulations (e.g., Fullmer, 2019) there is no final payment. Unlike an annuity, there are no guaranteed cash flows, since the funds are typically invested in risky assets.…”

Section: Introductionmentioning

confidence: 99%

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Optimal performance of a tontine overlay subject to withdrawal constraints

Forsyth,

Vetzal,

Westmacott

2023

ASTIN Bull.

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We consider the holder of an individual tontine retirement account, with maximum and minimum withdrawal amounts (per year) specified. The tontine account holder initiates the account at age 65 and earns mortality credits while alive, but forfeits all wealth in the account upon death. The holder wants to maximize total withdrawals and minimize expected shortfall at the end of the retirement horizon of 30 years (i.e., it is assumed that the holder survives to age 95). The holder controls the amount withdrawn each year and the fraction of the retirement portfolio invested in stocks and bonds. The optimal controls are determined based on a parametric model fitted to almost a century of market data. The optimal control algorithm is based on dynamic programming and the solution of a partial integro differential equation (PIDE) using Fourier methods. The optimal strategy (based on the parametric model) is tested out of sample using stationary block bootstrap resampling of the historical data. In terms of an expected total withdrawal, expected shortfall (EW-ES) efficient frontier, the tontine overlay dramatically outperforms an optimal strategy (without the tontine overlay), which in turn outperforms a constant weight strategy with withdrawals based on the ubiquitous four per cent rule.

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Section: Intuitionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Optimal performance of a tontine overlay subject to withdrawal constraints

Forsyth,

Vetzal,

Westmacott

2023

ASTIN Bull.

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“…Alternatively, the balances of those who die can be divided up and redistributed to the surviving investors more frequently. The latter type of tontine can be used to develop new financial products that would provide reliable, pension-like income for retirees, like tontine annuities, tontine pensions, and individual tontine accounts (see, e.g., Forman and Sabin 2016;Forman and Sabin 2015;Fullmer 2019;Fullmer and Sabin 2019a;Sabin 2010;Milevsky and Salisbury 2015;Goldsticker 2007;Newfield 2014).…”

Section: Tontines and Pooled Annuitiesmentioning

confidence: 99%

State-Sponsored Pensions for Private Sector Workers: The Case for Pooled Annuities and Tontines

Fullmer¹,

Forman

2020

SSRN Journal

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This paper explains how state governments could create new low-cost lifetime assurance funds to help provide retirement income security for millions of private-sector workers who currently lack pension coverage. Basically, an assurance fund operates like a mutual fund held within a defined contribution plan, but with the added features of mortality pooling and fully-funded lifetime payouts. As we envision them, assurance funds would be offered as annuity-like investment options on the new investment platforms being created by states like Oregon, California, and Maryland that offer their citizens the opportunity to participate in state-sponsored retirement savings plans. Adding an assurance fund could effectively turn these retirement savings plans into lifetime pensions. To ensure their sustainability, assurance funds would operate under a strict budget constraint and be organized as either tontines or pooled annuities.

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Why Tontines? Why Now?

Milevsky

2022

How to Build a Modern Tontine

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Tontines: A Practitioner's Guide to Mortality-Pooled Investments

Cited by 5 publications

References 0 publications

Optimal performance of a tontine overlay subject to withdrawal constraints

Optimal performance of a tontine overlay subject to withdrawal constraints

State-Sponsored Pensions for Private Sector Workers: The Case for Pooled Annuities and Tontines

Why Tontines? Why Now?

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