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Tontines, retirement products where the longevity risk is shared in a pool of policyholders, have recently gained vast attention from researchers and practitioners. Typically, these products are cheaper than annuities, but do not provide stable payments to policyholders. While the policyholder's benets from buying tontines have been analyzed thoroughly in the literature, this presentation focuses on the insurer's benets resulting from underwriting tontines. In order to provide insurers more incentives to manage modern tontine schemes, we explicitly consider two fee structures paid to the insurer: a single initial fee, and a variable fee. Given the two fee structures, we determine the optimal tontine payoffs to and the expected utility of the policyholder. We find that a constant proportional fee charged over time and a single up-front fee deliver the same levels of expected utility if the two fees have identical initial values. We conclude that even with tontine fees of 12% of the initial wealth, risk averse pension savers would have a higher utility in tontines than in annuities charging 14% of the initial wealth. Finally, we find that tontine payments made by the insurer are less volatile than annuity payments, indicating that large parts of the tontine fee might be retained as a prot by the insurer.
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