The modern tontine

Weinert, Jan-Hendrik; Gründl, Helmut

doi:10.1007/s13385-020-00253-y

Cited by 18 publications

(3 citation statements)

References 55 publications

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“…Bernhardt and Donnelly (2019) study the inclusion of bequest motives in tontine products. Recently, research on reasonable ways to combine tontines and annuities has been more extensively explored, see, e.g., Chen and Rach (2019); ; Weinert and Gründl (2020). However, to the best of our knowledge, the idea to consider a tontine as a unit-linked product has not yet been considered in detail in the literature.…”

Section: Notesmentioning

confidence: 99%

Actuarial Mathematics and Risk Management

2023

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Commons Attribution (CC BY) license, which allows users to download, copy and build upon published articles, as long as the author and publisher are properly credited, which ensures maximum dissemination and a wider impact of our publications. Preface to "Actuarial Mathematics and Risk Management"This is a reprint of a Special Issue of Risks, co-edited with prof. Ermanno Pitacco.Prof. Pitacco left us, unexpectedly and sadly, before this Special Issue was closed. His contribution to it has been important. Prof. Pitacco was an outstanding scholar. His contribution to the development of actuarial mathematics has been sizable and will not be forgotten.

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Section: Notesmentioning

confidence: 99%

Actuarial Mathematics and Risk Management

2023

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“…A number of pooling structures, where a group of individuals create a fund which can be invested in the capital markets whilst periodically drawing down depending on survival, have been proposed in literature. Such products include group self-annuitization (GSA) schemes (Piggott et al, 2005;Valdez et al, 2006;Qiao and Sherris, 2013), pooled annuity funds (Stamos, 2008;Donnelly et al, 2013;Donnelly, 2015), tontines (Milevsky, 2014;Milevsky and Salisbury, 2015;Chen et al, 2019;Weinert and Gründl, 2020) among others. The design of these pooled products has mainly been analysed considering simple investment strategies.…”

Section: Introductionmentioning

confidence: 99%

Target Volatility Strategies for Group Self-Annuity Portfolios

Olivieri¹,

Thirurajah²,

Ziveyi

2022

ASTIN Bull.

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While the current pandemic is causing mortality shocks globally, the management of longevity risk remains a major challenge for both individuals and institutions. It is high time there be private market solutions designed for efficient longevity risk transfer among various stakeholders such as individuals, pension funds and annuity providers. From individuals’ point of view, appealing features of post-retirement solutions include stable and satisfactory benefit levels, flexibility, meeting bequest preferences and low fees. This paper proposes a dynamic target volatility strategy for group self-annuitization (GSA) schemes aimed at enhancing living benefits for pool participants. More specifically, we suggest investing GSA funds in a portfolio consisting of equity and cash, continuously rebalanced to maintain a target volatility level. The performance of a dynamic target volatility strategy is assessed against the static case which does not involve portfolio rebalancing. Benefit profiles are assessed by analysing quantiles and alternative strategies involving varying equity compositions. The case of death benefits is included, and the fund dynamics analysed by assessing resulting investment returns and the mortality credits. Overall, higher living benefit profiles are obtained under a dynamic target volatility strategy. From the analysis performed, a trade-off between the equity proportion and the impact on the lower quantile of the living benefit amount emerges, suggesting an optimal proportion of equity composition.

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“…Weinert (2017a) estimates the cost of a tontine compared to traditional life insurance products from an economic as well as a regulatory perspective. Weinert (2017b) analyses the implications of providing tontine members with the option to cancel the contract and derives the fair surrender value. Weinert & Gründl (2016) study the suitability of tontines with their age-increasing payout structure as complements to traditional retirement products against the background of the aforementioned demographic challenges.…”

Section: Introductionmentioning

confidence: 99%

Optimal portfolio choice with tontines under systematic longevity risk

Gemmo

Rogalla

Weinert³

2020

Ann. actuar. sci.

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We derive optimal portfolio choice patterns in retirement (ages 66–105) for a constant relative risk aversion utility maximising investor facing risky capital market returns, stochastic mortality risk, and income-reducing health shocks. Beyond the usual stocks and bonds, the individual can invest his assets in tontines. Tontines are cost-efficient financial contracts providing age-increasing, but volatile cash flows, generated through the pooling of mortality without guarantees, which can help to match increasing financing needs at old ages. We find that a tontine invested in the risk-free asset dominates stock investments for older investors without a bequest motive. However, with a bequest motive, it is optimal to replace the tontine investment over time with traditional financial assets. Our results indicate that early in retirement, a tontine is only an attractive investment option, if the tontine funds are invested in a risky asset. In this case, they crowd out stocks and risk-free bonds in the optimal portfolios of younger investors. Over time, the average optimal portfolio weight of tontines decreases. Introducing systematic mortality risks noticeably reduces the peak allocation to tontines.

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The modern tontine

Cited by 18 publications

References 55 publications

Actuarial Mathematics and Risk Management

Actuarial Mathematics and Risk Management

Target Volatility Strategies for Group Self-Annuity Portfolios

Optimal portfolio choice with tontines under systematic longevity risk

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