12 October 2005
Editor
Forum Page
Straits Times
I refer to the letter "Buying an annuity may not be the best option" by Dennis Ng Kah Wan (St Times, 7 Oct
2005).
Mr Ng said that if he keeps the minimum sum of $90,000 with the CPF Board, he will get a monthly payout of about $711 at the age of 62 for 20 years. He said that if this sum is invested in a life annuity, the payout will be between $398 and $483, depending on which annuity plan you choose and whether you are male or female.
Under the annuity plan now offered by NTUC Income, we pay a guaranteed monthly sum plus bonus. The bonus is determined yearly based on the average yield earned on the investments in recent years. Over the long term, we expect the bonus to vary from 1% to 3% per year, but this is not guaranteed.
If the $90,000 is used to buy a life annuity at age 55, we expect to pay a monthly sum of $543 from age 62, comprising of a guaranteed sum of $473 and an estimated bonus of $70. The monthly annuity will continue to increase each year based on the bonus declared for that year. Assuming an average bonus of 2% per year, the
monthly payment is expected to reach $662 at 72, $807 at age 82 and $984 at age 92.
The life annuity offers two attractions:
- it is payable for the lifetime of the annuitant
- the payment will increase with bonus in most years, providing a cushion against inflation.
From actuarial statistics, about 30% of male and 40% of female are expected to live beyond age 82. This proportion is expected to increase in the future, due to longer life expectancy.
Over 25,000 people have bought a life annuity from NTUC Income. A large proportion of them invested their CPF minimum sum with us. They do not wish to take the risk of living beyond age 82 and running out of money. We have a market share of 65% of all life annuities sold in Singapore. The remaining 35% are shared among 5 other
life insurers.
Tan Kin Lian
Chief Executive Officer
NTUC Income
Dear Heng Cheong,
ReplyDeleteWe suggest that you buy two separate annuities, one for the husband and another for the wife.
This comment has been removed by a blog administrator.
ReplyDeleteHi Mr Tan,
ReplyDeleteI have some doubts hope u can kindly assist me.
Eg if u were to earn $40000 annually, you will have to pay $950 for the income tax. Will u rather use your savings to invest more on the ideal plan to get a higher payout to cover the income tax charges or open a SRS account instead? I know that the interest charge for SRS is very low and money in SRS can be invested. But somehow the payout for the SRS is taxable. If i were to open an SRS account, my purpose is to escape from the income tax. which means that i have less cash with me to invest in different areas. Mr Tan do u get what i'm trying to explain?
Thanks
Hi all,
ReplyDeleteDo you all have any ideas on the performance for both
AIA Regional Fixed Income Fund and
AIA Acorns of Asia Fund
pls commend. Thanks
Dear Aiyoyo
ReplyDeleteYour savings in SRS can be invested in the Combined Fund.
You will enjoy some tax savings in SRS.
When you withdraw your savings from SRS, you have to declare half to be subject to tax.
But, if you withdraw after your retired, you tax rate is quite low. So, the tax payable on the SRS is very low.
I am not able to comment on the performance of other funds.