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Aug 18, 2021

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02:00 min read

A pensions new deal? Brookings backs tontines…

US think-tank Brookings is calling for pensions to be more equitable, highlighting that risk-sharing schemes such as tontines have an important role to play.

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The highly respected American economics think-tank Brookings has joined the growing list of research institutions calling out the need for better, more equitable pensions. And like the vast majority, they agree that tontines are part of the solution.

In its new book entitled, “Wealth after work: Innovative reforms to enhance retirement security” Brookings describes a US pensions landscape crying out for stronger products that address the widening wealth gap in American society.

In line with the prevailing school of thought among academics and commentators, it urges that more be done to tackle the structural racial and gender inequalities that are condemning many millions of lower-paid Americans to suffer highly uncertain financial futures. Indeed, enabling the less well-off to retire richer and with confidence is now seen as one of the most fundamental challenges facing society today.

The first hurdle to climb, according to Brookings, is encouraging mass access and participation. This can be achieved by encouraging auto-enrollment and automatic contribution increases for occupational schemes, something that is already in train in some US states.

The next challenge is to help people understand the pensions system more easily. This could mean offering them more comprehensive information, assisting them with managing their savings, or simply providing them with the tools to help them administer multiple benefits.

Brookings’ final proposal is for the provision of “better options for generating reliable income and managing savings during retirement”. Here, it cites “tontine-like pooling of longevity risk” among its three main options.

At Tontine Trust, we naturally concur that the pooling of longevity risk is by far the most effective, indeed only, way of securing reliable and rising lifetime income benefits. But our MyTontine product, with its simplicity, transparency and low cost is also brilliantly able to solve the accessibility issue that Brookings correctly highlights as being the weak link in the private pension system currently.

Read the full Brookings article here.

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Tontine Trust is a fintech enabling consumer-friendly lifetime income retirement products such as the state of the art TontineIRA™ via banks, chartered trust companies and credit unions (each a ‘Bank’).

Banking, trustee and fiduciary services in the US are provided by partner Banks which are regulated in the US to act as fiduciaries on behalf of US Tontine IRA™ accountholders (‘members’).

Tontine Trust provides and operates the TontineIRA™ administration and record-keeping platform on behalf of and under the supervision of the Banks.

Tontine Trust is not a Bank or a trust company and does not provide banking & fiduciary services other than certain administrative services in a ministerial capacity as the Trust Advisors to the Tontine IRA™s.

No information on this website or the platforms provided by Tontine Trust should be taken as constituting individual advice to you. The information is informational and of general guidance only. Tontine Trust does not provide investment management services, financial advice, banking or fiduciary services.

The choices you make or do not make around the investment of your retirement account are your own responsibility.‍ Neither Tontine Trust nor the Banks can be held responsible for any financial loss arising from your retirement choices or lack of them.

The amounts and duration of the lifetime income from the Tontine IRA™ are indicative only. By design, neither the amounts nor the duration of retirement income payments from a tontine plan are fixed or guaranteed.

Based upon many years of research and development, the TontineIRA™ platform displays reasonable best estimates of what level of income you can expect to receive over the course of your lifetime. These estimates are constantly reviewed (sometimes nightly) to incorporate any effects on expected incomes caused by changes in interest rates, investment returns, life expectancy and/or the actual mortality experience of members sharing the same tontine.

The Banks we work with are required to manage US trust assets in accordance with the Uniform Prudent Investor Act.‍

To ensure maximum security of capital and income for members, the Tontine IRA™ assets will be invested by the Banks in a basket of FDIC insured deposits such that each up Tontine IRA™ account can obtain FDIC coverage up to approximately $10m of assets per member.

Note that while the deposits made on behalf of the Tontine IRA™s are FDIC insured, the IRA accounts themselves are not a deposit or other obligation of, or guaranteed by a Bank or state chartered trust company and are not directly insured by the FDIC. Therefore they should be considered as being subject to investment risks, including a possible loss on the principal amount invested, for example when a member passes away before they have received total income in excess of their original contribution to the TontineIRA™.