All this BS about Annuity and of Singaporeans living much longer,
up to 82 and above; WHAT proof do they have that EVERYONE lives
past 62 or 82? Based on WHAT do they ASSUME people live longer than
before?
IN my opinion and observing frequent reports in our newspapers, I
think people in this generation and the next, are more prone to
dying earlier than the previous generations!
I just feel that the government is just trying to wangle more money
out of Singaporeans or simply avoiding or prolonging
payouts...
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GOLD FOR THE OLD
More money now or security for life?
By Leong Ching
August 18, 2007
ANNUITIES are little-known cash cows that guarantee a regular
payout for the rest of your life, in exchange for money up
front.
Alternatively, you can get a monthly payout when you retire at 62
by leaving your money in your CPF, but that is only for 20 years,
and not for life.
So, annuities should be better because they won't leave you without
an income if you live past the age of 82.
Indeed, the Government may have to make buying annuities compulsory
for all as Singaporeans live longer, Mr Lim Boon Heng, Minister in
the Prime Minister's Office, was quoted as saying this week.
Yet only 4.1 per cent of CPF members who turned 55 bought annuities
with their minimum sum last year.
There is a simple reason for this. The payouts from CPF are much
higher.
But suppose the CPF pays you for life, instead of for 20
years.
It may not be able to pay as much each month as it can under its
current 20-year payout.
But it should be able to pay much more than the profit-oriented
companies that offer annuities.
And that, if it is possible, would be the best option of all.
Take the $99,600 that is now required as the minimum sum in your
CPF retirement account. If you buy an annuity with it, you get $400
to $500 a month.
If you leave it with the CPF, you get $790 a month, but only for 20
years.
Mr Tan Kin Lian, former CEO of NTUC Income, reckons there need not
be such a large difference between the two.
He estimates that if a life annuity is offered by the CPF, it may
be able to make a monthly payout of about $750.
He said: 'As CPF is now paying 4 per cent on the balance in the
retirement account, there is no added cost in offering this same
investment yield under a CPF-administered life annuity plan.'
And retirees may get almost as much as they do now, but for life
and not just for 20 years.
Of course, the key will be to persuade CPF itself to offer the
annuity with a high payout.
But even if this happens, there can be other objections to taking
up an annuity.
One typical response can go like this: 'I want my family to get any
money that remains in my minimum sum after I die. With annuity,
they get almost nothing.'
Like insurance, annuities are a gamble on life. For insurance, the
payout comes if your life is cut short. For annuities, the reverse
is true.
With life insurance, you contribute progressively to a 'pool' from
which, when you die, the beneficiaries get the insured
amount.
CONTRIBUTE UP FRONT
With a life annuity, you contribute the entire amount up front into
the pool, which keeps most of the money if you die early, but pays
you more the longer you live.
MP Ong Kian Min said: 'I think most people don't find a life annuity attractive simply
because they don't want their descendants or estate to lose the
balance of the money not drawn out before their death.
'With the CPF minimum sum, whatever balance that is left upon death
passes on to the deceased's estate. People consider this to be
their own hard-earned money for them to will away and pass on to
whoever they so choose.'
The small death benefit that's offered under some life annuity
plans may not be enough for more than funeral expenses.
It's something like a pension.
Mr Ong said: 'When I was in the police force, I heard colleagues
lamenting that so-and-so officer retired and passed away soon
after, and he and his family did not get to enjoy his hard-earned
pension.'
But what if you live to be 100?
'For retirees who live to their ripe old age, it is wonderful,' Mr
Ong said. 'Some lose, some gain.'
Mr Tan has a more straightforward reply for those who feel they
must keep all their CPF savings to pass on to their children.
'You have other assets, including your property that can be passed
to your children,' he said.
'You should invest a certain sum in a life annuity for your own
benefit. You have to take care of yourself. This sum does not need
to be kept for your children.'