Fancy a 'lifelong income scam'?
Loh Chee Kong
WHAT was floated as a risk-pooling annuity — which families will
not get back if members fail to live beyond 85 years — could now
turn out to be a refundable "lifelong income scheme" that starts
dishing out monthly payments to members from the age of 80.
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The reasons? Singaporeans do not want their money to fall into
others' hands, and they do not believe they will live until
85.
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Even the proposal's original title, "National Longevity Insurance
Scheme", has gone out the window, to be replaced by what will now
be known as the "National Lifelong Income Scheme" — and subject to
the Government's green light, it will be managed by the Central
Provident Fund (CPF) Board.
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Professor Lim Pin, who chairs the committee tasked to craft the
nuts and bolts of the plan, said: "The title, 'longevity
insurance", does not give a positive connotation of longevity,
right? If you die early, you'll lose out. Now, we've thought out a
new name … Who doesn't want a lifelong income?"
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He was speaking to journalists on Wednesday, in offering a sneak
peek into his committee's recommendations submitted to the
Government. The full recommendations will be unveiled on Feb 12,
just ahead of Budget Day.
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After more than four months of formal feedback gathering from some
600 people — on an emotive policy the Government acknowledges is a
tough-sell to the masses — Prof Lim said two main issues stuck
out.
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One is the scepticism that one in two Singaporeans would live
beyond 85, the hard statistics notwithstanding. Prof Lim said
lowering the starting point for payouts to a "compromise" age of 80
would make it "easier" for people to accept the scheme.
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He also noted, experts have also found "no robust data" to support
the perception that the rich live longer and thus, should pay
higher premiums.
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Currently, CPF members can depend on payouts from their Minimum Sum
until they reach 85. But should the Government accept the
suggestion to allow annuity payouts from age 80, Singaporeans
hitting 55 could choose the age at which they actually want to
start receiving the monthly annuity payments, said Prof Lim.
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Those already above 55 when the change kicks in would be allowed to
opt in, but at a higher premium.
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The second issue involved calls for refunds to be paid to the
next-of-kin, should members die before reaching 85. "Refundability
was a very important point," said Prof Lim, attributing this to the
"Asian culture that you have to leave something for your
family".
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Without going into details, Prof Lim gave the assurance that
families could get back the capital sum in the event of an early
death. And should the member choose to forego the refund option,
they could get a larger monthly payout.
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Currently, some insurers offer refunds in their annuity schemes.
For example, an NTUC Income customer can choose a "capital
protected annuity" where the balance of the capital sum, minus
monthly payments, is refunded to the next-of-kin should he die
early. Only the interest earned is then left behind in the
pool.
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For the national scheme to provide a full refund, former chief
executive of NTUC Income Tan Kin Lian estimated that the cost "will
increase by 30 to 50 per cent".
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Nominated MP Kalyani Mehta said it would be "reassuring" to
Singaporeans for CPF to run the scheme, and "lowering the age to 80
would give people a better chance of enjoying the payouts".
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But Society of Financial Services Professionals president Leong Sze
Hian felt the recommended tweaks to the annuities plan did not
address his basic worry: Whether the national scheme, given the
more attractive annuity products on the market that the better-off
can afford, would end up serving "a pool of poor people".
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Pointing out how previous CPF plans, such as the Dependant and Home
protection schemes, ended up being privatised or as poor cousins of
financial products on the market, Mr Leong suggested the Government
directly aid this group, who "already don't have much money in
their CPF account in the first place".
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Associate Professor Mehta concurred that she could "see the lower
middle-income group struggling to get involved" and "how they can
be facilitated to be part of the annuity plan is the biggest
challenge ahead".
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Inflation is another worry, said Mr Tan: "Many people consider the
payout of $300 to be inadequate for today's cost of living. In 30
years' time, this sum will be so much smaller to serve the needs of
the elderly at that time."
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Still, Prof Lim had little doubt the public would be receptive.
"Initially, there was unhappiness: the Government taking my money
to do something else, things like that … all sorts of wild talk.
Now we are saying we are ensuring you a lifelong income — that's a
very big undertaking."
from speakers' corner
