Govt accepts Longevity Insurance
Committee's recommendations
By S Ramesh, Channel NewsAsia | Posted: 12
February 2008 1215 hrs
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SINGAPORE: The government has studied and accepted the
recommendations of the National Longevity Insurance
Committee.
In his letter to the committee's chairman, Professor Lim Pin,
Manpower Minister Ng Eng Hen described the committee's report as a
landmark document which will significantly strengthen the CPF
system.
Dr Ng said the government has also accepted the committee's
recommendation that the CPF Board administers the scheme as this
will give Singaporeans the assurance that the scheme is viable and
properly administered.
The minister said the CPF Board will be taking on significant risks
and responsibilities as operator, and since life expectancy can
change further and interest rates vary over the long term, the CPF
Board must ensure the financial sustainability of the scheme.
Dr Ng added in his
letter that the
Lifelong Income Scheme, which has been named 'CPF Life', will
greatly enhance CPF savings for Singaporeans.
This is because under the old system, many would have depleted
their savings after 20 years, despite having many more years to
live.
With the new scheme, CPF members need not worry that they will
outlive their CPF savings as they will receive an income for as
long as they live.
CPF Life, which will start in 2013, will automatically cover all
CPF members aged 50 and below this year.
According to the report submitted by the committee, 60 percent of
the approximately 35,000 active CPF members will have at least
S$67,000 in cash in their Retirement Account.
The committee also recommended that the income scheme be seamlessly
integrated with the CPF Minimum Sum Scheme so that both can fulfil
the same objective of providing a basic income for
retirement.
The
NLIC report also
suggested that the property pledge, which forms up to half of the
full minimum sum, be used to provide a lifelong income when it is
redeemed.
How CPF Life will work
When participants join the scheme, their minimum sum balances will
be split into two parts. The larger part will remain in the
Retirement Account, while the smaller part becomes the refundable
premium.
The Retirement Account pays a monthly income from age 65 till the
lifelong income payout age chosen by the CPF member.
The refundable premium continues the same payment from the payout
age for as long as the member lives.
Participants can choose the "Long Life Income Payout Age" – from 65
to 90 – or be placed into the default "Refund 80" which means their
payout age will start from 80.
Once the payout age is chosen, no changes will be allowed.
However, Prof Lim's committee recommended that the government
allows and facilitates an opt-in for older members, and those who
do not have enough balance in their accounts.
The report also stressed that the premiums to fund the Lifelong
Income Scheme will be affordable.
Preliminary calculations indicate that for men, it will be 24
percent of the minimum sum and for women, 28 percent of the minimum
sum.
Dr Ng concluded that the committee's
recommendations will
help Singaporeans retire with a peace of mind.
- CNA/so
