The Early History of the Annuity

Annuities have a storied history that stretches back more than two millennia. Of course, today, we have modern financial tools aimed at meeting your current needs, but some of these financial tools have been used by people in some form for thousands of years!

Originating during the Roman era, these financial instruments, known as annua or annual stipends, were early forms of the annuities we recognize today. Investors would make a one-time payment in exchange for a guaranteed yearly income, either for life or a pre-determined period. A notable figure in the development of annuities was Domitius Ulpianus, a Roman who is attributed with devising the first table of life expectancy, laying the groundwork for modern annuity calculations.^[1]

The utility of annuities evolved through the Middle Ages, becoming a vital tool for financing the ongoing wars of the era. A unique form of annuity known as a tontine emerged during this time. In a tontine, participants bought shares in an annuity pool, receiving lifetime payments that increased as other participants passed away. This system continued until the final participant stood, who would then inherit the remaining money.^[1]

The 18th century saw annuities gain popularity as a means of securing a lifelong income, particularly in Europe. Governments, recognizing the stability annuities provided, began selling them to fund military campaigns, support the royal household, and compensate loyal citizens. In England, the sale of annuities was bolstered by numerous acts of Parliament, aiming to finance wars and royal expenses. This period also marked the height of annuities’ popularity among the European elite, and was referenced in the works of Charles Dickens and Jane Austen. It allowed the elite to protect themselves financially if they found themselves “falling from grace” in the complicated social world of 18th-century high society.^[1]

The financial tools we have today are based on these concepts that have worked for centuries. But, of course, there are now nuances and modern updates to these tools that make them more ready for our modern economy and lifestyle. If you’re looking to explore adding annuities to your financial toolbox, Click HERE to reach out to one of our professionals at Haven Financial Group today for a complimentary review of your situation. With the aid of an experienced professional, you can build a retirement plan that takes your needs into account and is tailored to what you want your golden years to look like.