But pensions are just the same thing as tontines on a larger scale, right? If in a pension scheme people live longer than expected, pensions will have to fall (or contributions rise). What's the difference (except scale)?
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.
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.