_ Dean McClelland, Founder TontineTrust
_ Taiki Asakawa, Blockchain Advocate, Former Actuary for Sony Life
- Overview: What is a Tontine
- Why is Blockchain technology so transformative to Tontines
- What is the potential market opportunity for Blockchain based Tontines
Singapore-based OCBC Bank CEO Samuel Tsien was interviewed in 2016 on whether he thought that blockchain was the future of finance.
Tsien’s opinion was that blockchain could take banking right back into the past stating that “..a true distributed ledger, if implemented, will mirror an old form of financing, the tontine.”
What is Tontine
There are various forms of Tontines but the most popular version is simply a lifelong income contracts. They were first issued by European governments 365-years ago and became so popular with investors that the King of France lost his head over them (literally!).
In the late 19th century, Insurance companies launched Tontines in the US and again they were so popular that within a single generation, more than 50% of all US households had invested in one and over 7.5% of US National Wealth was now held in Tontines.
What was the Big Deal
Traditionally, if you wanted to receive a pension like income for the rest of your life, you gave your money to the King who promised to pay you back a fixed amount every month for as long as you lived.
However, if you died sooner than expected, that was very bad luck for you but very good for the king who no longer had to pay you every month.
In  the King of France wanted to raise money to fight a war but not enough investors wanted to buy into a pension contract.
An Italian Banker named Lorenzo Di Tonti suggested a crazy new idea.
Let people invest in the pension contract that pays back a regular fixed amount but now, when members die, the King continues to paying the same fixed amount and now each surviving investor receives a larger share of the payout. And this continues for as long as the last remaining investors survived.
The city of Kampen was the first to issue a “tontine” which was so successful that many national tontines were soon launched by France, England, Ireland and many other European states over the next century before the governments decided that “paying all of the profits to the members” was too generous to continue..
In the US insurance companies entered the tontine business in the middle of 19th century.
The Tontines were again incredibly popular and successful until these financial institutions also came to the conclusion that “paying all of the profits to the members” was too generous.
In fact, evidence was found that incredibly expensive parties for the Insurance executives were being paid for out of the capital that belonged to members of the tontine pensions. A major investigation followed which proved that the financial institutions had also been tampering the with membership ledgers and mis-managing the assets.
In 1906 regulators issued new rules designed to make Insurers play fair with the members of the Tontines. Instead the Insurance companies simply switched to selling “life annuities” where they could legally keep the all of the profits for themselves.
This brought an end to the last era of mass-market tontines. Since then, the preferred product of the Insurers have been so unpopular that the overall rate of household retirement savings in the US has fallen ever since.
The Future of Savings: Tontines on the Blockchain
Fast forward to the 21st century where almost half of all retirees are expected to outlive their private savings.
Governments cannot be trusted to come to the rescue because the pension schemes of the 20 largest OECD countries already contain a combined $78 Trillion blackhole and are headed for bankruptcy, if they are not technically already there.
Insurance based contracts remain unpopular due to high fees and low returns.
For almost as long as academics and computer scientists had been talking about creating true digital money, notable academics and retirement experts have been talking about the benefits of bringing back tontines as a way to protect individuals from the disastrous consequences of outliving their savings.
Founded in 2017, TontineTrust identified the opportunity to create a genuinely peer-to-peer tontine pension system which:
●Utilises smart contracts to manage the payouts fairly & to avoid the risk of bankruptcy;
●Will utilise biometrics, their own digital currency & other modern technologies to reduce the running costs by an order of magnitude resulting in higher payout yields for the members;
●Will use public blockchains to offer unparalleled transparency on the underlying assets, fees and payments to the members, (all of which will remain pseudonymous to each other).
To develop the fully regulated tontine platform and reward the developer and financial communities that will take the project to the world, TontineTrust has launched a new Stellar-based digital currency (TON$) which will serve many important roles within the platform and across the ecosystem as a whole.
In the words of Forbes magazine, TontineTrust is targeting a multi-trillion-dollar global retirement income market with their upcoming “ETF Tontine” which will be investing in a conservative mix of many of the largest low cost traditional index funds.
In the past 10 years alone, similar “Robo-Advised” ETF portfolios have reached US$ 4 Trillion and according to Deloitte, they are expected to reach US$ 16 Trillion by 2025.
However, Robo-Advised ETFs are only a partial solution to the lifelong income problem because nobody knows how much they can afford to spend every month.
This is where the Tontines come in.
By pooling the assets, investors can share the risk of running out of money. The result is a generous lifelong income stream that can be trusted to reward you for healthy living and which if you live long enough, will have you living like a King.
For further details,