Word of the Day -- Tontine

A tontine is an investment plan for raising capital, devised in the 17th century and relatively widespread in the 18th and 19th centuries. It combines features of a group annuity and a lottery. Each subscriber pays an agreed sum into the fund, and thereafter receives an annuity. As members die, their shares devolve to the other participants, and so the value of each annuity increases. On the death of the last member, the scheme is wound up. In a variant, which has provided the plot device for most fictional versions, upon the death of the penultimate member the capital passes to the last survivor.

The investment plan is named after Neapolitan banker Lorenzo de Tonti, who is credited with inventing it in France in 1653, although it has been suggested that he merely modified existing Italian investment schemes.  Tonti put his proposal to the French royal government, but after consideration it was rejected by the Parlement de Paris. The first true tontine was therefore organised in the city of Kampen in the Netherlands in 1670. The French finally established a state tontine in 1689 (though it was not described by that name because Tonti had died in disgrace, about five years earlier). The English government organised a tontine in 1693. Nine further government tontines were organised in France down to 1759; four more in Britain down to 1789; and others in the Netherlands and some of the German states. Those in Britain were not fully subscribed, and in general the British schemes tended to be less popular and successful than their continental counterparts.


By the end of the 18th century, the tontine had fallen out of favour as a revenue-raising instrument with governments, but smaller-scale and less formal tontines continued to be arranged between individuals or to raise funds for specific projects throughout the 19th century, and, in modified form, to the present day.