Tontine Bond Ladders
10 Pages Posted: 15 May 2019
Date Written: April 16, 2019
Tontines are useful vehicles for providing retirement income. Their payouts, however, will necessarily vary as a function of investment returns and the mortality experience of the membership pool. Retirees who place a high value on income stability will desire to minimize the variability of these payouts. This can be accomplished via a large membership pool to minimize the effect of mortality experience volatility and by using immunizing cash-flow matching techniques to minimize the effect of investment volatility. A structured bond ladder can achieve this quite effectively.
Keywords: Tontines, Pensions, Retirement, Structured Payouts
JEL Classification: G11, J26
Suggested Citation: Suggested Citation