Schroders group chief investment officer Alan Brown has mooted the possible reintroduction of tontines to tackle retirement funding problems.
Originating in the 17th Century, tontines combine the features of a group annuity, group life insurance and a lottery. Each investor pays money into the vehicle and the pooled total is invested. Investors receive dividends until the last survivor takes the remaining assets.
Once popular in France, the UK and US, tontines are banned in all but the former due to the incentive for investors to kill each other to bolster their shares.
Brown says it would not be unreasonable to reintroduce a “civilised and updated version”. He says: “I am not talking about a return to the days of cups laced with arsenic. It is a viable option as it tackles the issue of investment and life longevity risk.”
Hargreaves Lansdown pensions research manager Tom McPhail says: “It needs a strong framework considering how they have been used in the past.”