Some of the drivers of this are:
1) Ageing populations.
2) The people currently pondering retirement have significant assets because they lived through a time of significant economic growth.
3) Increasingly cash-strapped governments and their social security worries
How would "the blockchain" anonymise anything? Isn't it the opposite, if all transactions are transparent?
suppose money went from A-->B-->C-->D-->E, and B,C,D never uses an bitcoin exchange / other 'offline' purchase / etc.
(Also, B could send to C1, C2, C3 and then so on to hide the track.)
then, how can anyone be sure that A,B,C,D are the same person/different person?
Or... by "retroactively" - do you mean sometime in the future (hopefully far far away) where bitcoin's hash algo. is broken?
Or the person who sent/received money to/from you revels who you are, or information which helps identify who you are.
Or there are warents authorizing authorities to take your devices and then they have all your identies.
Also when you send Bitcoin from a wallet that has received money to multiple addresses, you can't be sure which coins are being sent. As such they can also associate multiple addresses together by which coins they sent.
new_hash = hash(previous_hash . all_new_transactions . random_number)
You won't immediately know if A, B, C, and D are all the same person, but you can look at what has happened at those addresses (or previous addresses) in the past, and (eventually) what happens in the future, and draw conclusions from that. If you use a new address for every transaction, and never merge your money, you may be able to obfuscate the flow for a while, but you have to make sure you don't leave any patterns in the timestamps, and make sure you generally know what you're doing. Any mistake could mean that people know it's you. Moreover, money is generally used for 'offline' things eventually. You may purchase something from a completely normal person who doesn't obfuscate his transfers at all, and then get outed when the police ask that guy who they got those suspicious coins from.
Someone please prove me wrong, but I don't think this is a start-up idea.
The big problem is how would you sell this? It's going to be very difficult.
I have several comments:
(1) The idea is sufficiently complicated that average people won't understand it. And with retirement money, if they've managed to save some, the average Joe will be fearful about switching it to something new and different. (Bitcoin is complicated too, but the average Joe--not the techie Joe--is driven by greed if he gets into Bitcoin. There's a huge possible upside to Bitcoin, mining stocks, options and commodities trading, etc. No get-rich-quick option exists for a tontine.)
(2) The name tontine has to change. There are too many murder mystery and ghastly "death pool" associations. Beside changing the name, you need to tweak the concept just enough to deny that the new thing you're selling is a tontine. "No, ours is not a tontine because ours maximizes payout when it reaches 100 long-life members, not the last survivor as in a tontine."
(3) The only way I see tontines coming about is by edict. The teachers' pension fund or the government employee pension proclaims that they are switching, and that's that. Or they give employees a harsh choice: pay a huge fee to continue with the normal pension or enroll for free in the tontine.
I suppose a start-up could implement the technology and try to sell it to big pension funds. That's more like contract work rather than a high-growth business.
Like everything, there are downsides, but there's nothing terribly crazy-bad about tontines.
There are many things in life which technically give a perversive incentive to murder or commit other crimes, yet the perverse incentives aren't a show stopper.
One example of this is "I want your Mercedes, I will murder you and steal it."
Another example is a will and testament. Sure, sometimes people murder because of these contracts, but as a society we've done a good job of mitigating this problem.
[Which IMO makes tontines sound even more sucky, because it encourages free-riding when it comes to how much people put in.]
The article mentions annuities, which are again, in my understanding, basically the same thing, and highlights that tontines "could be much less costly than annuities because the risks are not taken onto the balance-sheet of an insurer" - not sure I understand that.
The difference alluded to might be that while both annuities and tontines insure against individual longevity risk, the case of unexpected collective longevity is borne by the insurer in the case of annuities, but the insured in the case of tontines.
Defined Benefit: Provider promises to pay $n per year for the duration of your retirement. Usually inflation linked etc.
Defined contribution: You and your employer put money in an investment vehicle and on retirement that pot can be used in a variety of ways to fund retirement (ie annuity, drawdown etc).
Both Annuites and DB pension payments are largely immutable, short of bankruptcy (of the pension fund / insurer respectively) there is usually no way to alter the benefits due to pension laws. They cannot be modified down once promised. For DB schemes the promise could have been made 30 years ago when interest rates were 10% and life expectency was 10 years on retirement, annuities are promised on retirement so have a better expected accuracy on cost. This is why DB pensions are phasing out at high rates - they're completely unsustainable.
Your core point:
Annuities are just risk pooling, pure ins-sewer-ants, some people die early, some late, and the insurer redistributes such that everyone gets a slice of the pie. The insurer takes on the full risk of the average life being longer.
DB pensions are the same distribution/pooling principle, only it's the pension fund taking on the risk of cohort mortality. Note, there are some really cool longevity swap transactions being done so funds can better guard against this risk.
I don't have any sort of understanding of tontines - limited as I am to a couple of episodes in cartoons for sources. The reason that risks are expensive on an insurers balance sheet is because of capital requirements - all risks need to be provisioned for by holding liquid short term investment grade bonds ("cash") which is a horrific vehicle to hold assets in. Even though they're only holding a % of their exposure - the tontine avoids that cost, hence the "cheaper" argument.
In a pension, this can only be reflected in the payout up to a point. As such, much of the effect of mis-predicted returns is borne by current pension premiums and the captial buffer of the pension. Same goes for withdrawals, if either more or fewer people survive to benefit from a pension that isn't directly borne by the other pensioners.
With a tontine, the payout is directely linked to total number of beneficiaries and total returns. Any variation is borne directly by the benificiaries. This, means there is essentially no risk in administrating a tontine, as your capital buffer can't 'fall short'. Make the tontine big enough, and the risk averages out.
After amtortizing this risk, a trend-change (e.g. aging population or economic depression) is borne by the administrator in case of a pension and borne by the beneficiaries in case of a tontine.
Most likely, I won't live to his age, but if I do, I don't want the money to run out.
I don't believe in leaving a large inheritance for my children. (They need to work for the position in society.)
Some kind of "outlive my savings" insurance is quite appealing because then I don't have to leave someone or something an inheritance.
Perhaps at a certain age, maybe 80, I could just turn over my retirement for a guaranteed payment until I die?
Perhaps at a certain age, maybe 80, I could just turn
over my retirement for a guaranteed payment until I die?
Some have extra features - like paying out for your spouse's life after your death; increasing the payment annually based on inflation; and even partial refunds if you die in the first five years.
That's exactly what an annuity is.
And lose out to children whose parents don't believe this?