Irish fintech set to turn the tide on the global pension crisis

If betting on your own longevity while ensuring a guaranteed income for the rest of your life sounds like an attractive proposition, then Tontine Trust has the retirement package for you

Richie Kelly, chief operations officer, and Dean McClelland, chief executive, Tontine Trust: ‘Experts are saying there’s a retirement crisis on its way and the only way we're going to solve this is to bring back the tontines’

Potentially, we’re leading a new multitrillion-euro industry, Dean McClelland, founder and chief executive, Tontine Trust, said.

Ireland, like every other western country, faces a retirement crisis. For most people, the state pension alone will not be enough to survive on. There is a growing consensus globally that the solution is to revive a retirement plan that is centuries old.

“As the baby boomer generation retires with over €50 trillion of savings, we directly address their greatest financial problem with the most sustainable and cost-effective lifetime income solution in the world. Research shows that it even enhances their pension wealth by 87 per cent with no added risk,” McClelland said.

Sixty per cent of over 55s are now more scared about the consequences of running out of money in old age than they are of dying. “A few years ago, I noticed my mother seemed down and when I asked her, she said that in her golf club all of her retired friends were frightened of running out of money, wondering if they might have to rely on their kids to take care of them.”

Women most likely make up the majority of that 60 per cent because typically they retire with less money saved as a result of lower pay and career breaks. The former investment banker began searching for a solution.

“I started reading about this thing called a tontine, and I found lots of academic papers from highly respected academics around the world saying that there’s a retirement crisis on its way and the only way we're going to solve this is to bring back the tontines.”

“When you join a tontine, you're taking a bet on you. You no longer worry about living 20 years, running out of money and becoming dependent on your kids because you are taking a bet that you’re going to outlive everybody else. If you do, the payoff is so great, you'll never have to worry about money again.”

That behavioural science mechanism has historically proven to be the fastest way to raise the pensions savings rate in any particular country, because everybody wants to take that bet, McClelland said.

“Since 2017, we have been developing a solution based upon the Irish tontines of 250 years ago which attracted pension capital from all across Europe. Our system mathematically guarantees you will never run out of money even if you live to age 120. Better yet, you can expect the monthly income to rise faster than inflation.”

The Swiss Federal Institute of Technology published a study showing that tontine pensions enhance a retiree's pension wealth by 87 per cent with “zero added risk”. “Helpfully for us, the OECD now agrees and twice in the past year has published reports explaining that tontines can ‘reduce risk for savers and governments and enable higher levels of retirement income’. They have also proposed making them mandatory by default for all OECD retirees seeing as they are now the best option.”

New tontine-like pensions have already been launched in Canada, Australia and shortly Britain.

“We are getting ready to launch the world’s first modern pure tontine pensions initially on a Pan-European basis, but as quickly as possible into the other OECD countries starting with the US and the UK,” McClelland said.

“We are patent pending in 38 countries and have been granted a trademark in 27 countries. We just raised another €1 million in a round led by a Silicon Valley-backed accelerator. Now we are working on getting tax approvals and growing the team of 20 which could soon start doubling every six months.”

McClelland said: “With a standard EIIS investment, investors get back their capital and 20 per cent after four years – along with the tax incentives. Some EIIS investors prefer direct equity participation because they see the potential. We are open to both.”

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