A tontine not an accumulator

So, winning £1.5 million on a £2 bet, eh?

Mr Whiteley, a heating engineer who only goes to the races twice a year, put his money on the Tote Jackpot, which requires punters to pick every winning horse in six races.

Yesterday, 363,000 tickets picked the winner in the first leg, but just 9,076 tickets then repeated their success in the second. The field was slashed again after the third race, which saw 571 punters go through. Only seven people picked the fourth winner, and Mr Whitley was the only ticket left for both of the final races.

As each race takes place, those who did not pick the winner are eliminated and the field of gamblers rapidly thins. If no one picks all six winners, the winning pot rolls over to the following event.

That\’s a tontine, not an accumulator.

Last man in scoops the pot, rather than it being about the odds of the horses actually running (which I think were 368,640 to one).

12 comments on “A tontine not an accumulator

  1. Having never heard the word, this is the second time today I have read it (another was a comment on a blog noting that some closed pension schemes are like this)

  2. “Having never heard the word”: oh dear, oh dear, what’s the world coming to, what do they teach in the schools nowadays, decline and fall of western civilisation, even my Uncle Eck knew the word, in Connemara they talk of little else, Hell in darkest N Yorkshire I’ve eaten in a pub called The Tontine, Ellery Queen, Edgar Allan Poe, infantilisation, feminisation, even the lunatics who read The Tax-Dodging Guardian include among their number, etc etc etc.

  3. Tontines used to crop up as plot devices in detective novels. Pretty sure there’s an Agatha Christie one.

  4. Although I think that when tontines were first invented, the last investor didn’t get the capital.

    Tonti invented it as a way to raise capital. So the scheme promoter got the capital, but paid out a fixed dividend every year which was divided between all the surviving investors. As investors died off, the amount of dividend received by each of the surviving ones increased, but they never got the capital back.

    The idea was that the operator could get away with offering a lower overall dividend, because people would invest in the hope of being one of the survivors and therefore benefitting later (and if you weren’t one of the survivors, losing the dividend was the least of your problems).

    I think the New York Stock Exchange was originally capitalised through a tontine of that sort.

    But tontines of that sort became uneconomic, because the operator had to keep paying out a fixed dividend for as long as a single investor was alive, so it only needed one very long-lived investor for it to cost you a fortune. And people got wise, and invested in their grand-children’s names.

  5. Richmond (Surrey) bridge was financed in the eighteenth century by means of a tontine. £26,000 was raised in shares of £100. See http://www.richmond.gov.uk/home/leisure_and_culture/local_history_and_heritage/local_studies_collection/local_history_notes/richmond_bridge_local_history_note.htm

    The dates mentioned do imply that some very young people bought the shares.

    I recall seeing a notice of a sale of a share dated, I think, in the 1820s. Potential buyers were invited to go and inspect the original holder and assess his state of health so they could decide what they should offer for an investment that would depend upon his remaining alive.

  6. This could be said of the Tote as a whole, couldn’t it? It generally pays out the pot, rather than worrying about odds.

    There used to be (supposedly) a New York bank which paid its board a fixed total fee per meeting to be divided amongst the directors who actually turned up. 100% attendance occurred only once – when a blizzard had blocked the roads, making each director hopeful of be the only one to make it.

  7. Robert, that’s interesting, thank you.

    Funds raised 1774 (or thereabouts), last remaining shareholder died in 1859 – 85 years later! No wonder tontines went out of fashion as a way of raising capital.

  8. I only know the word because my former flatmate was a Lloyds broker, and therefore was adept at working out what could and couldn’t get past the anti-tontine rules that were passed after people used, erm, unnatural means to alter the demographics of the tontine pool (e.g. EMI can insure Mick Jagger against dying before he completes his next contracted album for them, with themselves as the beneficiaries, but they can’t continue the policy after his contract runs out).

  9. Definitely a country-house murder mystery movie adaptation of The Wrong Box which I dimly remember watching in the 70’s. Only visual image I have is a long pull-out crane shot from a helicopter as credits rolled.

    I always get a mental association with ‘peal of bells’ when I hear this word, but that’s tantony, right (whence tintinnabulation)?

  10. David

    Agrred about tinnabulation – the sound of bells…but tantony is to do with pigs I think, so am not sure of the linkage.

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