Tontine

Tontine, a society formed for raising money for some definite purpose, the lenders receiving interest for their loan, and an indefinitely increasing interest in proportion to those who survive the other members of the society. In this latter respect a tontine somewhat resembles a lottery, though some hold that it is no more a lottery than is an ordinary assurance society. But in the case of an assurance society the death of the assured is certain, the only element of chance being whether the assured can keep the premium paid, and how many premiums he has to pay before his representatives become entitled to the sum assured; whereas in the case or a tontine the increase of income is altogether a matter of chance in any particular case. The name is derived from a Neapolitan banker named Lorenzo Tonti, who settled in Paris, and in the year 1653 proposed to raise a huge loan for the national exchequer upon a new principle. His idea was to issue BOO francs shares and to divide the subscribers into ten classes - i.e. those under 7 years of age, those from 7 to 14, 14 to 21, etc. Each class was to divide a fixed proportion of interest among its members, and, as the members of a class died off, the survivors became entitled to all interest due to the class; and upon the death of the last member of the class the profits of that class passed to the State. This scheme fell through, partly through national prejudice against Tonti and his patron Mazarin, who were both Italians; but in 1689 Louis XIV. established a tontine to last 40 years, and in 1736 the last survivor was drawing 73,500 francs as interest upon her 300 francs share. Many such societies have been started in France, and the principle has been introduced into Great Britain and Ireland. In the United States it has also been popular. In 1871 such a society was proposed for the acquisition and management of the Alexandra Park and Palace. The principle has also been applied to the formation of clubs, the survivors becoming proprietors.