But history was written when, in 1654, the banker Lorenzo Di Tonti (who gave his name to all subsequent plans) proposed a tontine structure to reduce the cost of long-term borrowing for the king of France at the time. In the centuries that followed, tontines were used by governments and states across Europe and the first English tontine was issued even before the bank of England was founded. But in Europe, tontines are most commonly used in France, where they reduce inheritance tax for very wealthy clients. In Switzerland, however, we find the largest private tontine, the pension fund of 1.7 billion francs, but even this is overshadowed by the Swedish national pension system, which is essentially run like a tontine. In most places in the United States, the use of tontines to raise capital or earn income for life is still considered legal; However, outdated legislation in two states has fostered the false perception that the sale of tontines is illegal in the United States. [28] Although they seem strange today, tontines have a family tree steeped in history that dates back at least half a millennium. The name comes from a 17th century Italian financier, Lorenzo de Tonti. It is not clear whether he actually invented the tontine, but Tonti presented a tontine plan to the French government in the 17th century to raise funds for King Louis XIV. Tontines can also provide a solution to longevity risk – the risk that you will outlive your money. In addition, proponents say that with automation and developments like blockchain technology, today`s tontines could show something that was missing in previous versions: transparency and therefore fewer opportunities for fraud. The tontine market is as large as the life insurance market, especially among baby boomers looking for an alternative to their defunct annuities. Tontine Pensions was launched in the US market 150 years ago by Equitable Life. Their resounding success led all insurance companies to quickly replicate the product, and in 40 years, more than half of U.S.
households included a member of a tontine, and tontinic assets accounted for more than 7 percent of U.S. national wealth. However, in order to improve product profitability for insurers, the policies included toxic clauses such as the insurer`s ability to „cancel“ tontine membership if a member`s monthly payment was not recorded by the insurer on time. Such clauses led to numerous court cases and, eventually, an investigation in 1906 that revealed that insurers and/or their employees had manipulated the Tontines` assets and membership books and, as such, had defrauded all Tontine members. A law was quickly passed banning the supply of these types of contaminated tontines. However, without the toxic clauses, insurers actually had to pay all profits to Tontine members, and so the insurance industry switched to selling other, more profitable products. Below is a list of completely legal tontines, but first let`s clarify the likely origin of the misunderstanding, namely two key elements of the tontine story that need to be understood. For the record, while I am not a lawyer and this is not a legal opinion, I will highlight some important laws and opinions about tontines. Part of our mission is that the next generation of Tontines will set new standards for all future financial services products in terms of transparency and value for money. At the peak of their popularity in the 1900s, tontines accounted for nearly two-thirds of the insurance market in the United States, accounting for more than 7.5 percent of the country`s wealth. In 1905, there were an estimated nine million active tontine policies in the United States, in a country with only 18 million households.
Despite their popularity, tontines had gained a bad reputation in the United States due to a series of high-profile insurance scandals, so for some they remain synonymous with greed and corruption. In Europe, tontines are regulated by Directive 2002/83/EC of the European Parliament, and tontines are still common in France. Interestingly, the English Parliament continued to allow the king to issue tontines, which were backed by the Irish government that controlled it at the time. In the Dark Ages, state tontines were banned in Britain because long-time members were paid too much money. When Equitable Life Assurance began operations in Australia in the 1880s, an actuary of the Australian Mutual Provident Society criticized tontine insurance, calling it an „immoral contract“ that „imposes a murder premium.“ [26] In New Zealand, another major critic of tontines at the time was the government, which also issued its own insurance. [27] In Singapore, the Chit Funds Act 1971[41] defines the application of the legislation to the operation of chit funds, also colloquially referred to as tontines, but operating on a different principle commonly known as ROSCA (Rotating Savings and Credit Association). Tontines were popular for raising funds for certain projects. For example, one of the most famous and well-documented tontines was the early Masonic tontine in the early 1700s, which was a plan to raise £5,000 for the construction of a hall for the use of Freemasons at their London headquarters. Subscribers had to deposit certain amounts of money at certain times and received interest on their subscription. The principal never had to be repaid, only the interest. The interest was distributed equally among all subscribers.
The other big mistake and reason why most tontines became illegal in the UK was that if you bet on the life of someone (other than yourself), one or two deaths that could improve your chances of becoming the „last man standing“ couldn`t be undesirable. Tontine is the name of an early system of capital mobilization in which individuals deposit into a common pool of money; They receive dividends based on their share of the return on investments made with the pooled money. When the members of the group died, they were not replaced by new investors, so the product was divided among fewer and fewer members. Surviving investors literally profited from the deaths of people they knew – a characteristic that many thought macabre. Even at their peak, tontines were considered somewhat repulsive. As a kind of rotating savings and credit association (ROSCA), tontines are well established as a savings tool in Central Africa, in which case they act as savings clubs where each member makes regular payments and the kitten is in turn borrowed. They are set after each credit cycle. [38] In West Africa, „tontines“ – often composed mainly of women – are an example of economic, social and cultural solidarity. [39] So, instead of something that belongs to the pages of a detective novel, a modern version of the tontine could be a viable way for people to fund their final years. Tontines could even provide a safer and more affordable way for U.S. companies to kick-start retirement.
Komentari su zatvoreni.