tontine

A tontine is an investment plan in which participants contribute to a common fund and receive annuities or dividends based on their share in the pool. As participants die, their shares are reallocated among the surviving members, increasing the benefits for the survivors. No new members are added after the tontine begins, and a deceased participant’s share does not pass to heirs, but instead enhances the remaining participants' income.

Tontines were especially popular in Europe and North America during the 1700s and 1800s, often used by governments to raise public funds. They typically concluded either when only one or a few survivors remained, or under rules established at the tontine’s creation. Tontines fell out of favor and were effectively banned in the United States in the early 1900s due to concerns about fraud, abuse, and moral hazard. Modern versions, sometimes called “tontine-style pensions,” are occasionally discussed in actuarial and retirement-planning circles, though they are rare and heavily regulated.

[Last reviewed in June of 2025 by the Wex Definitions Team]

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