A “tontine” is an investment plan for raising capital, devised in the 17th century and relatively widespread in the 18th and 19th centuries. Louis XIV of France used tontines to save his ailing treasury and to fund municipal projects.
Each investor pays a sum into the tontine. Each investor then receives annual interest on the capital invested. As each investor dies, his or her share is reallocated among the surviving investors. This process continues until the death of the final investor, when the scheme is wound up. Each subscriber receives only interest; the capital is never paid back; it reverts to the state.
In a later variation, the capital devolves upon the last survivor, thus dissolving the trust and potentially making the survivor very wealthy. This version has often provided the plot device for mysteries and detective stories. Questionable practices by US life insurers in 1906 led to the Armstrong Investigation in the US restricting some forms of tontines. Nevertheless, in March 2017, The New York Times reported that tontines were getting fresh consideration as a way for people to get steady retirement income.
The investment plan is named after Neapolitan banker Lorenzo de Tonti, who is popularly credited with inventing it in France in 1653. Subsequently, many tontines were formed. By the end of the 18th century, the tontine had fallen out of favor 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.
Tontines were eventually banned in Britain and the USA, because there was too much incentive for subscribers to bump each other off to increase their share of the fund, or to become the last survivor and so claim the capital. For that reason, it has been a wonderful plot device for detective story writers.
The Wrong Box (1889), is a comic novel by Robert Louis Stevenson and Lloyd Osbourne. The plot revolves around a tontine originally taken out for some wealthy English children, and the resulting shenanigans as younger family members of the two final survivors vie to secure the final payout. In 4.50 from Paddington (1957), a Miss Marple murder mystery by Agatha Christie, the plot revolves around the will of a wealthy industrialist, which establishes a settlement under which his estate is divided in trust among his grandchildren, the final survivor to inherit the whole. The settlement is described, inaccurately, as a tontine.
I will continue to put my money under the mattress.