in this way, a tontine annuity could operate in perpetuity.
design a tontine fund, a tontine annuity, and finally, a tontine
In this Section, we propose a tontine annuity that closely resembles a variable annuity.
In a tontine annuity, mortality-gain distributions would not be paid out immediately when other members die.
It turns out that a tontine annuity constructed in this way closely resembles an actuarially fair variable annuity (i.e., one without insurance agent commissions or insurance company reserves, risk-taking, and profits).
For example, Table 6 shows a sample monthly statement for a member of a tontine annuity who lives through the first month after turning age 65 and who had exactly $250,000 in his account at the end of the prior month.
Alternatively, a tontine annuity could be designed to make monthly tontine-annuity distributions that mimic an inflation-adjusted variable annuity.
In short, a tontine annuity could be designed to resemble an actuarially fair variable annuity or an actuarially fair inflation-adjusted variable annuity.
For example, if the tontine annuity in Table 6 had earned $1000 of investment interest in that month, the balance in the account at the end of the month would have been $1000 higher, and, consequently, the monthly tontine distribution would have been $8.52 higher--$2141.52 instead of the $2133, as shown in Table 6 ($2141.52 = $252,041.67/117.6939).