Capital protection for Life annuity

Dear Mr Tan,

Does a life annuity allow the buyer to avoid losing the capital, if he dies at an early age?

REPLY

You can buy a capital protection for the life annuity. In the event of death during the early years, there is a refund of the balance of the capital (after deducting the annuity payments that have been received.

If you buy a capital protected annuity, you will receive a lower monthly payment. For a male at age 60, the difference is about 12 percent, i.e.

Monthy annuity for $100,000 of capital invested:
- with capital protection: $429
- no capital protection: $488

If the total paid out under the annuity exceeds the invested capital, there is no refund. This will occur after 19 years, in the above example. However, if the payment is increased due to bonus, the duration will be shortened.

You can read this FAQ for more details.