With increasing average life expectancy, the risk of needing to finance for longer retirements has become a significant problem in South Korea. In response, the country has introduced a novel financial product known as the 'tonteen pension', which rewards individuals with greater pension payouts the longer they live. This product, which involves redistributing the contributions from deceased or canceled policies to the survivors, has sparked interest within the insurance industry to see if it can serve as an effective means for retirement planning.

Shinhan Life introduced the first-ever tonteen pension product, 'Shinhan Tonteen Pension Insurance', at the beginning of this year. The tonteen pension operates by pooling funds from several members, which are then managed collectively. In this system, survivors receive the portion of the funds from those who die prematurely or cancel their policies, meaning that those who live longer are paid higher pensions. This shared burden of longevity risk is a distinctive feature of this financial strategy.

The concept of the tonteen pension originated from 17th-century Italy due to financial strategist Lorenzo Tonti and gained prominence in the late 19th century in the United States, where it was applied in a significant percentage of life insurance products. However, ethical concerns and scandals involving insurance fund misappropriation led to its prohibition. In Japan, as the population rapidly aged, similar products resurfaced in 2016. In South Korea, the introduction of the tonteen pension faced regulatory challenges; however, Shinhan Life has innovated the product design to allow beneficiaries to receive part of their contributions if they die before the pension starts, thus complying with consumer protection regulations while maintaining the fundamental tenets of the tonteen structure.