Sunday, May 04, 2008

Smoothing or bunching

COMMENT POSTED IN MY BLOG

There is some confusion of this new scheme with "income smoothing" whereby the insurance company pays steady bonuses, regardless of its investment returns.This new bonus scheme is not income smoothing. It is the opposite. It is "income bunching". The policyholder's steady bonus stream is removed and a hefty terminal bonus is substituted.

Larry Haverkamp
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1 comment:

Anonymous said...

I don't call income bunching but income stealing. How? The deferred period should be inflation adjusted for all cash flows. If they are not , it is stealing.
Smoothing is just an excuse. Without reducing the annual bonus NTUC can also do the smoothing. I believe this has been done all this time in the past. Now they talk about smoothing. Maybe smoothing means tieing over a difficult period by paying less annual bonus. or does it mean smoothing some money "lapses"?

May 04, 2008 10:11 AM

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