Government may make buying annuity compulsory replied by pearlie27 @ Sat, 01 Sep 2007 00:09:07 +0800

pearlie27 — Sat, 01 Sep 2007 00:09:07 +0800

Is the govt turning its back on its people? Boasts of 18% p.a. returns by Temasek over the last 30 years but unwilling to spend 0.044% of the returns from the $200 billion reserves on its elderly.

From Sg_Review:

Kaye Poh wrote:

22 Aug 2007

Further to my email below, with stats taken from the government website:

As of 2006, there were 8,300 males and 16,300 females (24,600) above 85 years old out of a total of 3,608,400 Singaporeans (about 0.7% of Singaporeans are above 85 years old). Source: http://www.singstat.gov.sg/pubn/reference/yos/statsT-demography.pdf.

Using the upper end of the expected annuity payout (S$300 per month) upon reaching the age of 85, these 24,600 who live beyond 85 years old are expected to withdraw some S$88,560,000 per year from the annuity pool.

Putting this $88m in perspective, all the government needs is to earn 0.044% p.a on its estimated $200 billion in reserves to finance this group of octogenarians. Compare this minuscule 0.044% with the reported 18% p.a. returns by Temasek over the last 30 years.

Can the government afford to do it for its needy elderly citizens? Definitely. But will it? No!

Government may make buying annuity compulsory replied by waliao @ Fri, 31 Aug 2007 17:44:49 +0800

waliao — Fri, 31 Aug 2007 17:44:49 +0800

Sooner or later, Singaporeans r gonna grow sick of this system n get their butts off e chairs n start protesting. Which will most probably be e starting of e end as e country crashes n fades into obscurity.

Government may make buying annuity compulsory replied by kilua @ Fri, 31 Aug 2007 17:21:08 +0800

kilua — Fri, 31 Aug 2007 17:21:08 +0800

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/295348/1/.html

Said a group manager from Great Eastern Life: "This compulsory scheme is a chance for insurance companies to 'wake up their ideas'. Annuities are big in the west, but have never taken off in Singapore. The returns on annuities are now averaging just 2.3 per cent... The take-up was poor. Companies should now take advantage of the upcoming demand for annuities and come up with good products with better returns, say, 5 per cent."

Government may make buying annuity compulsory replied by kilua @ Fri, 31 Aug 2007 17:16:03 +0800

kilua — Fri, 31 Aug 2007 17:16:03 +0800

I wonder this what this consultant would think, if he knows the annuity that we are going to be forced to buy is like the one Lim boon Heng said.

Annuities: It's risk-sharing among all
By Christopher Tan | Posted: 31 August 2007 0728 hrs

Over the past week, every newspaper and financial periodical in town has been talking about one thing: The changes in the Central Provident Fund (CPF) and, in particular, the introduction of the compulsory annuities scheme.

The gist of the scheme is: To ensure that payouts from the Minimum Sum last throughout the life expectancy of CPF members, the Government has recently proposed delaying the Minimum Sum draw-down age progressively from 62 to 65.

To give a stream of life-long income to those who may live beyond 85, the Government is also planning to set aside a sum of money from each individual's minimum sum to buy into a compulsory annuity for all CPF members. If one dies before age 85, the amount goes into the pool and the payouts for those who are still living.

Then the unhappiness arrived, in all forms — articles, commentaries, forums, online chat, and so on. Singaporeans felt they have been denied the choice of deciding whether they want to buy the annuity, or leave the money in their CPF to pass on to their loved ones if they die early. It is their own money, after all.

As I read the remarks and sensed the unhappiness of fellow Singaporeans, I thought for a really long time to try and see what was wrong with this scheme.

The intentions of the scheme are clear. Singaporeans are ageing and we are living longer. A large proportion of Singaporeans, especially the poorer and less educated ones, may not know how to plan for themselves, and could invest unwisely. And although financial awareness talks are being organised to help people understand the importance of planning, many people may still not do it well. They could run out of money. The annuities scheme will at least provide them with subsistence living. Otherwise, the Government will have to take care of them with taxpayers' money. This means less tax money for other important areas such as infrastructure, defence, education and so on. Poverty may also create social problems. The overall effect for all of us will be bad.

As chief executive of an independent private wealth management firm that serves top-end, affluent and high-net-worth individuals, as well as a trainer and consultant in retirement planning to the general masses, I meet people from all walks of life. As I speak to hundreds of retirees each month, I know that most are not financially ready for retirement. The people who are really ready are those like our clients — who are wealthy and have sufficient income, and wealth, to plan for themselves.

I scrutinised the scheme for a long while and my conclusion is that this is indeed a well thought-out programme. Based on our calculation, CPF members may only need to set aside $4,000 to $7,000 from the minimum sum for the compulsory annuity. This is a very small amount relative to the current minimum sum of $99,600 or $120,000 in 2013. Thus, the monthly drawdown from the minimum sum from age 65 will not be greatly reduced. If the CPF Board manages this annuity, it is likely to do better than an insurance company as it has the economies of scale and lower expenses.

So what exactly are we unhappy with? After much thinking, I concluded that it is due to a matter of perception, lack of knowledge and discontentment.

Singaporeans are unhappy because we feel that the Government is often high-handed. In this case, we feel that the Government has already decided on forcing everyone to participate in a scheme that does not give us flexibility to do what we want with our own money.

In Singapore, once an intention is announced, feedback sessions and consultations are perceived as mere motions — the belief is that it will be implemented anyway. Whether this is a fact or perception remains to be debated. Even good policies will be rejected once such a perception is formed.

The unhappiness is also partly caused by lack of knowledge. Many do not understand how the scheme works. As an example, many may not know that the estimated monthly payout amount at age 85 from the annuity scheme would probably have taken into consideration the number of those who may not have lived to that age, and have contributed their share into the pool. This probably explains why many doubt whether those who survive beyond age 85 will benefit.

There are comments that the Government is looking to benefit itself financially. But many do not understand that the Government is not a private enterprise. It is like a trustee to a pool of funds of which every Singaporean is a beneficiary.

Finally, the greatest cause of unhappiness is discontentment. Humans, including myself, are a discontented lot.

Government may make buying annuity compulsory replied by kilua @ Fri, 31 Aug 2007 17:14:12 +0800

kilua — Fri, 31 Aug 2007 17:14:12 +0800

Government may make buying annuity compulsory: Lim Boon Heng
By Julia Ng, Channel NewsAsia | Posted: 14 August 2007 1745 hrs

SINGAPORE : The government may make buying annuity compulsory, said Mr Lim Boon Heng, Minister-in-Charge of ageing issues.

Speaking to reporters after a National Day Observance ceremony at the Mitsuboshi Overseas Headquarters on Tuesday, Mr Lim said the government is looking to build the annuity component into Singapore's plan for the ageing population.

With longer life expectancy, Singaporeans will have to work longer, beyond the present retirement age of 62.

The government is considering a law on re-employment, to get employers to guarantee their employees a job once they reach 62.

But it may not necessarily be the same job or the same salary.

Mr Lim urged employers and employees to start preparing for the re-employment law as soon as possible.

This is because the law would provide only a framework and not spell out how re-employment should be done.

Besides working longer, another way to prepare for old age is to have a form of insurance that caters to a longer lifespan.

And one way to do this is by buying an annuity.

Said Mr Lim: "If you have a full minimum sum in CPF, when you withdraw the CPF, CPF will pay you $700 over a month. But it's for 20 years. At the end of 20 years, you'll have nothing to withdraw.

"If you buy an annuity, the insurance company will pay you less - $500 a month. But the insurance company will have to pay you for as long as you live. And if you live to 100 (years old), they'll have to continue paying you till you're 100. Therefore it's a lesser monthly sum but you're insured a little longer.

"We may have to make it compulsory for everyone, but I think for now, we should explain to people what annuities are and how people can benefit, to get people to understand it." - CNA /ls

Government may make buying annuity compulsory replied by qlqq9 @ Sat, 18 Aug 2007 17:45:51 +0800

qlqq9 — Sat, 18 Aug 2007 17:45:51 +0800

Originally posted by HyperFocal:

Hell will be better managed then...

Oh no. Then if I have the chance I will tell those residing there to start saving now. When they take over, these people will have a choice to migrate elsewhere. ha ha

Government may make buying annuity compulsory replied by HyperFocal @ Sat, 18 Aug 2007 17:42:34 +0800

HyperFocal — Sat, 18 Aug 2007 17:42:34 +0800

Originally posted by qlqq9:

May be they will be allowed to bring over, they must be thinking they go there with lots of money hoping to continue to be MM, PM, DPM and so on.

Hell will be better managed then...

Government may make buying annuity compulsory replied by qlqq9 @ Sat, 18 Aug 2007 17:27:27 +0800

qlqq9 — Sat, 18 Aug 2007 17:27:27 +0800

Originally posted by drawer:

This fuking PAP leaders only think about money n nothing else.As if after their death,they can bring their money to the afterlife world......Dream on man.

May be they will be allowed to bring over, they must be thinking they go there with lots of money hoping to continue to be MM, PM, DPM and so on.

Government may make buying annuity compulsory replied by qlqq9 @ Sat, 18 Aug 2007 17:25:30 +0800

qlqq9 — Sat, 18 Aug 2007 17:25:30 +0800

Originally posted by Daddy!!:

When wealth is lost, nothing is lost,
When health is lost, something is lost,
When character is lost, all is lost.
Billy Graham

REad this quite long ago. I like the it. How true.

Government may make buying annuity compulsory replied by Daddy!! @ Sat, 18 Aug 2007 17:05:49 +0800

Daddy!! — Sat, 18 Aug 2007 17:05:49 +0800

When wealth is lost, nothing is lost,
When health is lost, something is lost,
When character is lost, all is lost.
Billy Graham

Government may make buying annuity compulsory replied by Daddy!! @ Sat, 18 Aug 2007 16:47:17 +0800

Daddy!! — Sat, 18 Aug 2007 16:47:17 +0800

how about buying shares of local insurance companies?

Government may make buying annuity compulsory replied by drawer @ Fri, 17 Aug 2007 22:42:38 +0800

drawer — Fri, 17 Aug 2007 22:42:38 +0800

This fuking PAP leaders only think about money n nothing else.As if after their death,they can bring their money to the afterlife world…...Dream on man.

Government may make buying annuity compulsory replied by Rock^Star @ Fri, 17 Aug 2007 19:19:15 +0800

Rock^Star — Fri, 17 Aug 2007 19:19:15 +0800

Originally posted by Lin Yu:

clearly annuity is dependent on the "bonuses" and the "bonuses" are forecasted figures. remember the incident where many thought that they need not pay by x years as forecasted by the insurer but ended up still having to pay.

Seems that only NTUC has the bonus feature. Other insurers and banks do not because they only have the purely guaranteed payment portion. Can't blame them for trying to make the annuity look attractive but they do deserve flak for not living up to initial picture presented.

Your latter comment was referring to AIA. Well, allow me to say that it is only a half-truth. The ST finance repoter, Lorna Tan, was eager to score a quick one and she reported without ascertaining all facts. She later won an ST award for "objective reporting". Only those within the industry who really study the facts, know.

As you mentioned, the key word is 'forecast'. This non-guaranteed clause was already written in the policy contract. Insurance selling 10-15 years ago was not as complicated as today. Financial analysis was not exactly necessary and many unscrupulous agents who wanted an easy sale deliberately omitted mention of this clause. Of course, there are also those who have highlighted it to the customer's attention. And moreover, there are also forgetful customers.

Government may make buying annuity compulsory replied by Lin Yu @ Fri, 17 Aug 2007 17:47:17 +0800

Lin Yu — Fri, 17 Aug 2007 17:47:17 +0800

Originally posted by Rock^Star:

I was confident that you shall see the light and you have.

Don't just support every damn policy blindly. It makes one look spineless.

clearly annuity is dependent on the "bonuses" and the "bonuses" are forecasted figures. remember the incident where many thought that they need not pay by x years as forecasted by the insurer but ended up still having to pay.

Government may make buying annuity compulsory replied by Rock^Star @ Fri, 17 Aug 2007 11:36:39 +0800

Rock^Star — Fri, 17 Aug 2007 11:36:39 +0800

Originally posted by Daddy!!:

CPF's payout is higher because there is a time-limit to it, while perpectual annuities does not have any time limit. This big difference, you dont know meh. A financial planner before and yet dont understand this difference.

I was confident that you shall see the light and you have.

Don't just support every damn policy blindly. It makes one look spineless.

Government may make buying annuity compulsory replied by Daddy!! @ Fri, 17 Aug 2007 09:51:25 +0800

Daddy!! — Fri, 17 Aug 2007 09:51:25 +0800

Originally posted by kilua:

you missed the lock in period from 55 to 62.
http://forums.vr-zone.com/archive/index.php/t-40256.html

Mr Lim has to give the insurer $37000 when he is 55 and only starts collecting payout when he is 62.

If he left the money with the CPF board, at 62 he would have $48690.

Yes. Both you and m13 are correct. See below. Wow! 110 years old ! I think i dont even live beyond 75. Lets say I am Mr Lim and I die at 75, i would be able to pass $41K to my family members. If there is no refund from the annuities, this money $41K goes to someone else.

End of year capital Reinvested at 4%
Age Year Begin Withdraw End
55 0 $37,000 $0 $37,000
56 1 $38,480 $0 $38,480
57 2 $40,019 $0 $40,019
58 3 $41,620 $0 $41,620
59 4 $43,285 $0 $43,285
60 5 $45,016 $0 $45,016
61 6 $46,817 $0 $46,817
62 1 $48,689 ($2,196) $46,493
63 2 $48,353 ($2,196) $46,157
64 3 $48,004 ($2,196) $45,808
65 4 $47,640 ($2,196) $45,444
66 5 $47,262 ($2,196) $45,066
67 6 $46,868 ($2,196) $44,672
68 7 $46,459 ($2,196) $44,263
69 8 $46,034 ($2,196) $43,838
70 9 $45,591 ($2,196) $43,395
71 10 $45,131 ($2,196) $42,935
72 11 $44,652 ($2,196) $42,456
73 12 $44,155 ($2,196) $41,959
74 13 $43,637 ($2,196) $41,441
75 14 $43,099 ($2,196) $40,903
76 15 $42,539 ($2,196) $40,343
77 16 $41,956 ($2,196) $39,760
78 17 $41,351 ($2,196) $39,155
79 18 $40,721 ($2,196) $38,525
80 19 $40,066 ($2,196) $37,870
81 20 $39,385 ($2,196) $37,189
82 21 $38,676 ($2,196) $36,480
83 22 $37,939 ($2,196) $35,743
84 23 $37,173 ($2,196) $34,977
85 24 $36,376 ($2,196) $34,180
86 25 $35,548 ($2,196) $33,352
87 26 $34,686 ($2,196) $32,490
88 27 $33,789 ($2,196) $31,593
89 28 $32,857 ($2,195) $30,662
90 29 $31,888 ($2,194) $29,694
91 30 $30,882 ($2,193) $28,689
92 31 $29,837 ($2,192) $27,645
93 32 $28,750 ($2,191) $26,559
94 33 $27,622 ($2,190) $25,432
95 34 $26,449 ($2,189) $24,260
96 35 $25,231 ($2,18 $23,043
97 36 $23,964 ($2,187) $21,777
98 37 $22,648 ($2,186) $20,462
99 38 $21,281 ($2,185) $19,096
100 39 $19,860 ($2,184) $17,676
101 40 $18,383 ($2,183) $16,200
102 41 $16,848 ($2,182) $14,666
103 42 $15,252 ($2,181) $13,071
104 43 $13,594 ($2,180) $11,414
105 44 $11,871 ($2,179) $9,692
106 45 $10,079 ($2,17 $7,901
107 46 $8,217 ($2,177) $6,040
108 47 $6,282 ($2,176) $4,106
109 48 $4,270 ($2,175) $2,095
110 49 $2,179 ($2,174) $5
111 50 $5 ($2,173) ($2,16

Government may make buying annuity compulsory replied by kilua @ Fri, 17 Aug 2007 09:41:44 +0800

kilua — Fri, 17 Aug 2007 09:41:44 +0800

Originally posted by Daddy!!:

Mr Lim Yan Beng started with $37000 and not $48690.

Well, it is true that if he keeps his money in cpf and drawing $183 and reinvesting the balance at 4% per annum, his money will last him till around 90 years old. see below. if the pricing for our annuities is something ie $183 per month for a lump sum of $37000 , there is no added advantage for us to switch from cpf to annuities.

you missed the lock in period from 55 to 62.
http://forums.vr-zone.com/archive/index.php/t-40256.html

Mr Lim has to give the insurer $37000 when he is 55 and only starts collecting payout when he is 62.

If he left the money with the CPF board, at 62 he would have $48690.

Government may make buying annuity compulsory replied by Daddy!! @ Fri, 17 Aug 2007 09:24:06 +0800

Daddy!! — Fri, 17 Aug 2007 09:24:06 +0800

Mr Lim Yan Beng started with $37000 and not $48690.

Well, it is true that if he keeps his money in cpf and drawing $183 and reinvesting the balance at 4% per annum, his money will last him till around 90 years old. see below. if the pricing for our annuities is something ie $183 per month for a lump sum of $37000 , there is no added advantage for us to switch from cpf to annuities.

End of year capital Reinvested at 4%

Age Year Begin Withdraw End
62 1 $37,000 ($2,196) $34,804
63 2 $36,196 ($2,196) $34,000
64 3 $35,360 ($2,196) $33,164
65 4 $34,491 ($2,196) $32,295
66 5 $33,587 ($2,196) $31,391
67 6 $32,646 ($2,196) $30,450
68 7 $31,668 ($2,196) $29,472
69 8 $30,651 ($2,196) $28,455
70 9 $29,593 ($2,196) $27,397
71 10 $28,493 ($2,196) $26,297
72 11 $27,349 ($2,196) $25,153
73 12 $26,159 ($2,196) $23,963
74 13 $24,922 ($2,196) $22,726
75 14 $23,635 ($2,196) $21,439
76 15 $22,296 ($2,196) $20,100
77 16 $20,904 ($2,196) $18,708
78 17 $19,457 ($2,196) $17,261
79 18 $17,951 ($2,196) $15,755
80 19 $16,385 ($2,196) $14,189
81 20 $14,757 ($2,196) $12,561
82 21 $13,063 ($2,196) $10,867
83 22 $11,302 ($2,196) $9,106
84 23 $9,470 ($2,196) $7,274
85 24 $7,565 ($2,196) $5,369
86 25 $5,584 ($2,196) $3,388
87 26 $3,523 ($2,196) $1,327
88 27 $1,380 ($2,196) ($816)

Government may make buying annuity compulsory replied by maurizio13 @ Fri, 17 Aug 2007 08:22:44 +0800

maurizio13 — Fri, 17 Aug 2007 08:22:44 +0800

Originally posted by kilua:

If Mr Lim Yan Beng starts with $48690 and earn interest at the rate of 4% and draws only $183 per month, the sum can last him [b]54 years!. Annuities is for those who cant smell a bad deal.

http://www.bankrate.com/brm/business-calculator.asp
[/b]

$183!!!

Maybe last 3-4 days in the future.

Government may make buying annuity compulsory replied by kilua @ Fri, 17 Aug 2007 08:03:13 +0800

kilua — Fri, 17 Aug 2007 08:03:13 +0800

Originally posted by maurizio13:

Actually I disagree to some parts, the monthly payment should be around $272 (approximately), because the accumulated investment will still be earning returns until it's final payout.

$48,690 / PVIFA [3%, 20 years] = $48,690 / 14.8774 = $3,273 per year

Which means will get $272 a month.

Only if you can live longer than your investment's present value payout, then maybe it's worthwhile.

But I think what the minister meant was life annuities, which means they pay you annuity till you die. For such investments, unless you can forsee yourself living very long, else no point signing up because their payout is less than the normal annuity.

I think i did mentioned in my post $202 was arrived without calculating the interest earned. But thanks for calculating the exact payout.

Government may make buying annuity compulsory replied by kilua @ Fri, 17 Aug 2007 08:01:26 +0800

kilua — Fri, 17 Aug 2007 08:01:26 +0800

Originally posted by Daddy!!:

The fact that you use 240 means that $202 per month is over 20 years. But we are talking about perpectuality. So your calculation is off topic.

lets assume perpectuality to be 40 years, your calculation will be $48690/480 = $101 per month. Compare this with what Mr Lim Yan Beng got at $183.

If Mr Lim Yan Beng starts with $48690 and earn interest at the rate of 4% and draws only $183 per month, the sum can last him 54 years!. Annuities is for those who cant smell a bad deal.

http://www.bankrate.com/brm/business-calculator.asp

Government may make buying annuity compulsory replied by Atobe @ Thu, 16 Aug 2007 23:08:16 +0800

Atobe — Thu, 16 Aug 2007 23:08:16 +0800

Originally posted by Daddy!!:

scenario 3. which is most troubling, is that there is no partial refund if the person dies before he draws out most of the lump sum he puts in. It there is no refund, the balance goes to the insurance company. Statistics showed that most die at 80 plus, so it is quite easy to make a profit out of it. The shareholders of this insurance company would be quite happy.

so below are the important things to look for

i) any refund ?
ii) state guaranteed ?

i) any refund ?
ii) state guaranteed ?

This will be going against the grain of this government's philosophy in the Citizen's Responsibility in 'self-help'.

'Self-indulgence' is only reserved for the Elites in Government, not for the Citizens.

Government may make buying annuity compulsory replied by Daddy!! @ Thu, 16 Aug 2007 22:35:40 +0800

Daddy!! — Thu, 16 Aug 2007 22:35:40 +0800

scenario 3. which is most troubling, is that there is no partial refund if the person dies before he draws out most of the lump sum he puts in. It there is no refund, the balance goes to the insurance company. Statistics showed that most die at 80 plus, so it is quite easy to make a profit out of it. The shareholders of this insurance company would be quite happy.

so below are the important things to look for

i) any refund ?
ii) state guaranteed ?

Government may make buying annuity compulsory replied by qlqq9 @ Thu, 16 Aug 2007 22:29:24 +0800

qlqq9 — Thu, 16 Aug 2007 22:29:24 +0800

Originally posted by sunnytv:

Gahman relatives & fren working in insurance, so have to introduce business to them lah. His best friend NTUC.

Is NTUC under Temasek Holdings?

Government may make buying annuity compulsory replied by Atobe @ Thu, 16 Aug 2007 22:07:33 +0800

Atobe — Thu, 16 Aug 2007 22:07:33 +0800

Does it not surprise anyone that when it comes to our CPF Monies, this Government will not allow any Singaporean any 'Opt OUT option' to this proposed Annuity Scheme - when this is allowed for the compulsory organ donation plan in the event of death, and more recently compulsory HIV testing on hospital admission.

Is the reason for this non-existent option not loud enough, when OUR Money is to be drawn out from the Government's Treasury ?

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