A possible solution?

[XFool]

Tontines?

Interesting article* in the latest Economist about a revival of interest in Tontine schemes, or at least in collective financial products derived from them. The proposals, coming from "a small group of increasingly voluble academics, as well as some asset managers and actuaries" may provide a product to provide insurance against the risk of outliving one's savings.

"...an issue with which retirement planners, corporations and governments around the world are struggling to cope."

Could a collective product such as this provide the solution to the seemingly disregarded problem (which I have pointed out more than once) left by the abandonment of annuities for DB pensions, etc?

* p. 77 Tontines
'And then there were none'- Death pools might make a comeback

[XFool]

Not exactly Tontines, but one that has been mentioned previously:

How will new 'collective' pensions work? Royal Mail to pioneer a scheme that shares risks - but slashes income if things go wrong

This is Money

Interesting. 'collective defined contribution' pensions are now going live in the UK, starting with Royal Mail.

[Alaric]

Not exactly Tontines, but one that has been mentioned previously:

One way to look at it would be as an Investment Trust but with the value forfeited on death in exchange for a higher income and longevity guarantees. Smaller schemes at least may feel the need to reinsure the longevity risk.

If they are permitted to do their accounting the same way as Investment Trusts, namely that they are allowed to retain up to 15% of their annual dividend and interest income, that stabilises if not guarantees the income payout.

[XFool]

Not exactly Tontines, but one that has been mentioned previously:

One way to look at it would be as an Investment Trust but with the value forfeited on death in exchange for a higher income and longevity guarantees. Smaller schemes at least may feel the need to reinsure the longevity risk.

If they are permitted to do their accounting the same way as Investment Trusts, namely that they are allowed to retain up to 15% of their annual dividend and interest income, that stabilises if not guarantees the income payout.

Yes indeed. Though when I came up with the idea of something like this myself a few years ago and floated the suggestion on TMF. It proved immensely unpopular, amid dark mutterings of "Sounds like With Profit Funds".

[Alaric]

It proved immensely unpopular, amid dark mutterings of "Sounds like With Profit Funds".

It would have to go the extra mile and be unitised.

I would see it work that you would have a daily or weekly price at which you buy units. Periodically there's a distribution which tells you your retirement income "earned" so far. Perhaps the OEIC design would be copied and offer accumulation units so there's no explicit reinvestment transaction. Where there's an element of profit or loss sharing is on the longevity. If it was possible to make a deal with an annuity and longevity specialist like Legal & General, it might be possible to reinsure some or all of this risk.