King William's Tontine

In a time before bonds treasury notes or central banks there were tontines. These were schemes in which a group of investors lent money to a government corporation or king similar to a modern-day loan syndicate. But unlike conventional debt periodic interest payments were distributed only to survivors. As tontine nominees died the income of survivors correspondingly increased. Morbid perhaps but this was one of the earliest forms of longevity insurance in which the pool shared the risk. Moshe Milevsky tells the story of the first tontine issued by the English government in 1693 known as King William''s tontine intended to finance the war against French King Louis XIV. He explains how tontines work the financial and economic thinking behind them as well as why they fell into disrepute. Milevsky concludes with a provocative argument that suitably modified tontines should be resurrected for twenty-first century retirement income planning.