Question to an expert.
What is the point of investing your money in a tontine?
The tontine offers interesting investment opportunities. It is not a financial product, but a very old savings system. The principle is simple: savers come together in association to invest jointly for a period determined in advance, generally between ten to twenty-five years. The income from this savings is not distributed, it is reinvested in the tontine.
At the end of the fixed period, the savers still alive share the assets constituted, including the savings of those who have died along the way! This mechanism is therefore very popular because of its performance… for the survivors.
Like all investments involving some risk, the return on tontine can potentially be high and often higher than that of life insurance. In addition, taxation is also very favorable, since it benefits from the taxation of life insurance on income.
However, the financial tontine does not only have advantages. It’s a random contract: the invested capital and the return are not guaranteed, and there is no way to get your money back before the term. Be careful, if you die before the end of the term, the savings are not passed on to your heirs. To overcome this, it is often offered additional death insurance, quite expensive however.
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