Life annuity gives financial security

Hi Mr Tan,

Recently, I asked the agent to give me a life annuity. I get a return of about 5 percent only. My capital disappears when I die. I find this to be not attractive. Is there anything better?

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REPLY:

The return of 5 percent is actually quite good, considering that you can earn only 2% from bank deposit. The additional payout of 3% comes from your capital.

You actual return will be more than 5 percent. NTUC Income gives you an annual bonus that depends on the yield of their annuity fund. Under normal circumstances, the bonus will be about 1% to 3% and will be at a compounding rate. Your return will increase over the years.

You also get the guarantee that the payment will continue to be paid for as long as you live. You do not have to worry that your capital will run out earlier, if you live a long life. This is the best form of financial security.

Find out more from this FAQ.