Offer of refund to annuitants

5 December 2005

Editor
Forum Page
Straits Times

I wish to respond to two recent stories in the Straits Times about the buyback offer offered by NTUC Income to 12,000 purchasers who bought their annuities prior to 2002 (? November and 3 December).

Both stories indicate that the refund offer is not attractive as the deal that they are getting now. This is correct.

The interest rate of 4.5 percent that is used to compute the refund is based on the actual yield earned by our investments during the past 10 years. This is lower than the guaranteed return of 5 per cent that was used to compute the annuity payments.

A small number from this group of annuitants were unhappy that they did not get any bonus for the past three years. We decided to make this refund offer, so that they can find a better way to invest their money.

Less than 10 people took up the offer of the refund. The majority decide to stay with their current annuity plan. For others who need a longer time to decide, our offer is still available for them for a few more weeks.

We sent an explanatory note to our 28,000 annuitants to explain our practice in declaring bonus. This supplements the communication that was sent in past years.

During the past two weeks, we also held two dialogue sessions that were attended by 600 people. The sessions went on well. Several annuitants were interested to top up their annuity.

NTUC Income is a cooperative society. We collect the annuity money and invest them into an annuity fund. We invest the fund prudently to earn an attractive long term return. We use the surplus of the annuity fund to declare bonuses to our annuitants. We exercise fairness in declaring the bonus to the different series of annuitants who have bought their annuities on different guaranteed terms.

We will continue to hold dialogue sessions in the future. We invite the public to attend these sessions and learn more about the principle of pooling is applied to help annuitants to manage their risks. We want to educate retirees about the advantages of investing in annuities.

Tan Kin Lian
Chief Executive Officer
NTUC Income