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Tontines for today

An old solution to a new problem

By Richard Barry   September 2004

Why are so many companies closing their final salary pension schemes? High on the list of reasons is the longevity risk: a final salary scheme commits the company to continue paying a pension no matter how long the pensioner lives. When these schemes were widely adopted in the 1950s and 1960s, few pensioners lived past their early eighties, so this commitment was not a threat to the solvency of schemes, let alone to the companies themselves. But the spectacular improvement in our longevity is changing all that. The number of people aged at least 90 living in England and Wales…

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