King William's Tontine: Why the Retirement Annuity of the Future Should Resemble its Past

Description

In a time before bonds, treasury notes, or central banks, there were tontines. These were schemes in which a group of investors lent money to a government, corporation, or king, similar to a modern-day loan syndicate. But unlike conventional debt, periodic interest payments were distributed only to survivors. As tontine nominees died, the income of survivors correspondingly increased. Morbid, perhaps, but this was one of the earliest forms of longevity insurance in which the pool shared the risk. Moshe A. Milevsky tells the story of the first tontine issued by the English government in 1693, known as King William's tontine, intended to finance the war against French King Louis XIV. He explains how tontines work, the financial and economic thinking behind them, as well as why they fell into disrepute. Milevsky concludes with a provocative argument that suitably modified tontines should be resurrected for twenty-first-century retirement income planning.

Moshe A. Milevsky is a Professor at the Schulich School of Business at York University, Toronto and Executive Director of the nonprofit IFID Centre at the Fields Institute for Research in Mathematics in Toronto. He is also Managing Director of the Pi Longevity Extension (PiLE) Corporation, which is focused on helping pension funds, endowments and individuals extend the longevity of their investment portfolios. In 2005 he founded the software company, QWeMA Group, which he recently sold to CANNEX Financial Exchanges. He has published over sixty peer-reviewed articles, hundreds of newspaper and magazine columns, and is currently on the editorial board of numerous academic journals. This is his twelfth book.

'King William's Tontine entertains and, by asking why retirees should not be paid handsomely for bearing a little actuarial risk, informs our response to the looming retirement crisis in a way that no other book does. It should be read - with pleasure - by anyone with a personal or policy interest in this vital area.' William J. Bernstein, CFA Institute Book Reviews 'King William's Tontine is an excellent read and a model for the clear exposition of a difficult and little-known subject. Financial history buffs will particularly enjoy the first half of the book, and economists interested in retirement finance will want to engage with the chapters in which the author presents his own proposal. This is a book that should grace the shelves of many libraries. Its proposals are definitely worthy of serious consideration by anyone or any institution concerned with retirement finance.' The Journal of Retirement 'This is a fascinating book. Perhaps a good sub-title would be 'Everything you wanted to know about tontines but were afraid to ask' ... A well-written and well-paced read, I recommend it.' David Pollard, Trust Law International '... clearly and patiently explained ...' Richard Sutch, The Journal of Economic History 'When all is said and done King William's Tontine is a well-written, exceptionally well researched, easily comprehendible, entertaining and insightful romp through the history of tontines. Policymakers, academics, actuaries, financial professionals, and students alike all can enjoy this Milevsky book, without the need for or burden of heavily detailed mathematical formulae and/or proofs - which certainly is a welcome, deep breath of fresh air lost in most academic works today. God save King Billy's tontine!' William L. Ferguson, The Journal of Risk and Insurance