WHY ELSE DO WE LIKE IT? Milevsky goes to great lengths to explain the difference between the tontine and an annuity, which is a great financial literacy education in itself. For instance, with a tontine, the total interest paid each year to those within the group stays constant, while with a life annuity, as people die, the total paid out to the group declines over time. As well, with a tontine, payments to those who survive increase, and the longer they live the more money they get. But with a life annuity, payments and income to survivors stay constant.

ACTION ITEM: Whatever your age, if you’re preparing for retirement—or simply enjoy reading about interesting financial concepts and products—this book will give you a firmer grasp of retirement planning. Smart financial reading at its best.

KEY TAKEAWAY: “In some sense, I am hoping the readers will help advocate—implicity or explicitly—the acceptance of tontines as useful and valuable products worthy of reintroduction into society after almost a century of wandering in the wilderness.” – Julie Cazzin

BOOK EXCERPT

In the last decade of the seventeenth century, King William’s main priority and existential preoccupation was to secure the funds he needed to pay his troops and continue his campaign against France. William—who was a military commander and master strategist – still had outstanding debts to settle from his previous battles, including the 21,000 men he had hired to accompany him to England in 1688. Money was tight, and King Billy was in a bloody bind. I must admit that the story of an English monarch in need of money might sound a bit distant and incredulous to anyone in the twenty-first century. But then again, even Queen Elizabeth II, who ascended the throne in 1952 and has a personal net worth of more than £300 million ($480 million), has monarchical financial problems and disputes with Parliament over who should pay for what. In early 2013, a parliamentary committee questioned her household’s (over)spending, and for a brief period in 2013, the queen applied for welfare – yes, welfare! – to pay for the upkeep on some of her palaces. Presumably, the future King Charles III (her son), the subsequent King William V (her grandson), or even future King George VII (her great-grandson) will have similar run-ins with Parliament.

But three centuries ago—when the beginning of our story takes place—the Crown’s finances were even more precarious, precisely because they were subject to the whims of Parliament, which controlled all the purse strings. Yes, the monarchs owned land and were entitled to live in castles – and the Orange family owned large tracts in the Netherlands – but cash flow and income weren’t easy to obtain, especially to finance a war. The now-common practice of making the monarch accountable to the English Parliament directly – and the English people indirectly – was one of the great constitutional achievements of the late seventeenth century.

Sure, a millennia or two ago, kings could do as they pleased and seize whatever they wanted or desired, whenever they wanted, but not so by the end of the seventeenth century. If a monarch needed more money—whether to wage war or provision mistresses—he needed Parliament to authorize and approve the additional funds. Now, of course, Parliament couldn’t really order the “creation” of money by printing, as it does today. Its only source of revenue was taxes, including land tax, customs tax, and excise tax, as well as taxes on salt, wine, spirits, tobacco, and even births and marriages. Requisitioning or raising additional funds today requires increasing taxes, and, naturally, as the elected representatives of (some fraction of) the people, Parliament is reluctant to do so, especially for wars that aren’t widely supported.