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Modern tontine with bequest: Innovation in pooled annuity products

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  • Bernhardt, Thomas
  • Donnelly, Catherine

Abstract

We introduce a new pension product that offers retirees the opportunity for a lifelong income and a bequest for their estate. Based on a tontine mechanism, the product divides pension savings between a tontine account and a bequest account. The tontine account is given up to a tontine pool upon death while the bequest account value is paid to the retiree’s estate. The values of these two accounts are continuously re-balanced to the same proportion, which is the key feature of our new product.

Suggested Citation

  • Bernhardt, Thomas & Donnelly, Catherine, 2019. "Modern tontine with bequest: Innovation in pooled annuity products," Insurance: Mathematics and Economics, Elsevier, vol. 86(C), pages 168-188.
    • Handle: RePEc:eee:insuma:v:86:y:2019:i:c:p:168-188
    DOI: 10.1016/j.insmatheco.2019.03.002
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    References listed on IDEAS

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    Cited by:

    1. An Chen & Thai Nguyen & Thorsten Sehner, 2022. "Unit-Linked Tontine: Utility-Based Design, Pricing and Performance," Risks, MDPI, vol. 10(4), pages 1-27, April.
    2. Blake, David & Cairns, Andrew J.G., 2021. "Longevity risk and capital markets: The 2019-20 update," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 395-439.
    3. John Dagpunar, 2020. "Closed-form Solutions for an Explicit Modern Ideal Tontine with Bequest Motive," Papers 2005.00715, arXiv.org, revised Jun 2021.
    4. Chen, An & Guillen, Montserrat & Rach, Manuel, 2021. "Fees in tontines," Insurance: Mathematics and Economics, Elsevier, vol. 100(C), pages 89-106.
    5. Xie, Lin & Chen, Lv & Qian, Linyi & Li, Danping & Yang, Zhixin, 2023. "Optimal investment and consumption strategies for pooled annuity with partial information," Insurance: Mathematics and Economics, Elsevier, vol. 108(C), pages 129-155.
    6. Hieber, Peter & Lucas, Nathalie, 2020. "Life-Care Tontines," LIDAM Discussion Papers ISBA 2020026, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    7. Gerrard, Russell & Hiabu, Munir & Nielsen, Jens Perch & Vodička, Peter, 2020. "Long-term real dynamic investment planning," Insurance: Mathematics and Economics, Elsevier, vol. 92(C), pages 90-103.
    8. Fahrenwaldt, Matthias A. & Sun, Chaofan, 2020. "Expected utility approximation and portfolio optimisation," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 301-314.
    9. Dagpunar, John, 2021. "Closed-form solutions for an explicit modern ideal tontine with bequest motive," Insurance: Mathematics and Economics, Elsevier, vol. 100(C), pages 261-273.
    10. Chen, An & Hieber, Peter & Rach, Manuel, 2021. "Optimal retirement products under subjective mortality beliefs," Insurance: Mathematics and Economics, Elsevier, vol. 101(PA), pages 55-69.
    11. Lin He & Zongxia Liang & Sheng Wang, 2022. "Modern Tontine with Transaction Costs," Papers 2209.09709, arXiv.org, revised Jun 2023.

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