Tan Kin Lian's Blog: CPF Life will be operated on mutual principles

Friday, September 18, 2009

CPF Life will be operated on mutual principles

There were some negative comments about CPF Life - that the Government wants to make profit by operating this scheme and pay less to annuitants compared to the amounts that they have invested.

I asked some questions to CPF Board and they have given the reply here. The key points of the reply are:

a) A separate fund will be established for CPF Life
b) It will be credited with the premiums and investment income, and debited with the annuity payments, payment to beneficiaries and expenses of the fund
c) The expenses of the fund will be kept quite small, as the scheme is administered by CPF and enjoys economy of scale
d) The funds are not separately invested, but will be given a rate of interest that is pegged to long term government bonds plus 1%.
e) CPF Life will be operated on mutual principles, with the experience shared fairly among the members (i.e the profit does not go to the CPF Board or the Government).

I find this arrangement to be beneficial and in the interest of the annuitants. I hope that this will dispel any doubts about operation of the CPF Life scheme.

I thank the CPF for their helpfulness in giving this clarification.

Tan Kin Lian

Survey: CPF Life

22 comments:

Anonymous said...: Mr Tan,
where is the check and balance to ensure that CPF Life is not abused and exploited by the government to place into TH and GIC for gambling ? CPF rules and policies keep changing and so when is the last time that these work to benefit the layman ? CPF life is originally conceived from annuity scheme, and when the bullshit about life-span is exposed through research, the gahmen is quick to market it as something different now, which is typical of them. But then the trust and credibility are already broken, so why should we trust them now ?; September 18, 2009 9:04 AM
Anonymous said...: This is year 2009. Can they guarantee the profit won't go to CPF or the government as long as they are in power?; September 18, 2009 9:37 AM
Tan Kin Lian said...: Reply to 9:37 AM

You reflect the attitude of many Singaporeans who do not want to take personal responsibility and wish to get "guarantees".

My advice is: if someone breaks the guarantee, you should fight for your rights. Do not be passive.; September 18, 2009 10:42 AM
Tan Kin Lian said...: To 9:04 AM

I think that most changes to the CPF rules in the past were necessary and made for the benefit of the members. Simiarly, the changes to the CPF Life scheme were made to reflect the feedback provided by the public.

I have obtained the assurances of the CPF on how the scheme will be operated and have found their intention to be sincere. If you wish to continue the distrust of the Government, I will not try to change your mind. I only wish to give you my honest view.

If you read my other blog postings, you will find that I am quite outspoken on the failure of the Government to act on the land banking and the structured products. But that is a separate matter. We deal with each situation on its own merits.; September 18, 2009 10:47 AM
Bored said...: How can we fight for our rights when we can't have a voice in any matter?

How can we not seek assurance when all these CPF thingies are being forced down our throats?

And we are not told anything and everything...just look at Temasek; September 18, 2009 11:52 AM
Anonymous said...: You have to trust and accept the Singapore govt lah. Your life, your money, everything.

It's your fate unless you plan to migrate. If not, what other realistic choice?; September 18, 2009 2:19 PM
Anonymous said...: I would see CPFLife as part of investment portfolio in my basket of eggs.

Worldwide historical econ growth up to early-2000 was 3% in average.; September 18, 2009 3:57 PM
Anonymous said...: Thursday, September 17

SINGAPORE: Ninety—one per cent of Singaporeans do not feel well—prepared for retirement compared to the global average of 87 per cent, according to an annual report by Oxford University’s Institute of Ageing on Wednesday.

The Oxford Institute of Ageing is known for its gerontological research and training programmes.

Singapore, like most countries in the world, is facing an ageing population. In fact, the number of dependent adults is expected to surpass the number of dependent children for the first time next year.

The Oxford report suggested that the low level of preparedness is linked to a lack of access to financial advice. Although Singapore has a wide range of retirement products available, more could be done to educate families to plan for the long term.

The team responsible for the report conducted a workshop in Singapore to help stakeholders from the private and public sectors, non—government organisations and academics plan for an ageing society.

Participants were asked to suggest policy solutions for a variety of situations.

At the end of the three—day programme on Wednesday, researchers felt that Singapore is well—equipped to deal with an ageing population because there is a high level of awareness of the issues. One of the key solutions for Singapore is to keep older workers employed.

Dr George Leeson, deputy director, Oxford Institute of Ageing, said: "Governments need to help employers, employers need to help employees, and trade unions need to play a role. I know that in Singapore there are moves for re—employment legislation in 2012.

"What I think employers have to remember is that they are the people they have to keep in the workplace because there is going to be a demand for the skills they have."

Individuals are also encouraged to take responsibility for their own retirement by planning early, especially for financial security.; September 18, 2009 7:30 PM
Anonymous said...: //Dr George Leeson, deputy director, Oxford Institute of Ageing, said: "Governments need to help employers, employers need to help employees, and trade unions need to play a role. I know that in Singapore there are moves for re—employment legislation in 2012.//

Yeh, keep the insurance agents out of it and everything will go well.
Individuals to take responsibility by avoiding insurance agents who know nuts ,fxxx about retirement planning.All they know is dump wholeife and endowment products on us and they earn the huge commission for themselves by telling us lies and half truth. What about us?
Those who bought annuities better consult a third party, a qualified planner to see if the annuity suits you. It may not.When selling annuity the insurance agents never did fact finding but only told us the old folks that it was for wholelife and the CPF Minimum Sum draw down was not. This is not true.The insurance agents didn't disclose fully and told lies about CPF's scheme. The CPF draw down could be much better for many of us, higher payouts for at least 21 years and can be extended.
I was shocked to hear from a qualified financial planner that annuity dosen't suit everyone and not everyone will benefit fully from annuity by the insurance company. I am going to terminate my policy and leave it with CPF. Those with this annuity better do something about it and lodge a complaint with the insurance company about the agents for not telling the whole truth. Send a copy to MAS.

Soon to Retire..; September 18, 2009 8:18 PM
Anonymous said...: I have been following the CPF LIFE closely and asked questions from CPF.

Let me share with all of you some information about CPF LIFE.
1. Annuities offered by other Insurance companies will not offer us 4% return where CPF does it and make it a tsrget return.
2. I like the L-Bonus that offered by CPF LIFE up to $4,000 and it is the main attraction to me. $40,000 to earn $4,000 upfront is a real bonus for us. Do note that if you have less than $40,000, you will get less. if you are staying at the private property, you will get nothing. For HDB resident like me. I am glad that I could enjoy this extra bonus upfront.
3. I do not like to Income Plan and I hope that others must think twice before they opted for the Income Plan.
4. CPF LIFE is operating as a pool fund and it will be shared by all LIFE members. I suppose it is out of reach by outsider.

Just to share.; September 18, 2009 10:01 PM
Anonymous said...: You mean NTUC INCOME annuity? ohohoh , don't touch it with a 10 foot pole.You will be sorry. Those who have bought it recently my advice is to quit and go back to CPF. The annuity is rotten , when the new management took over everything went haywire.; September 18, 2009 11:26 PM
Anonymous said...: 4,000 is peanuts. For high income earners, this meagre L-bonua "freebie" is negligible just to join CPF Life. I would have preferred the current 117,000 to be taken out.; September 19, 2009 4:14 AM
Anonymous said...: "CPF LIFE monies will be invested in special Government bonds and.."

It is AAA grade !

Currently, my mother receives $287/mth from RA is not enough. A female is usually long life. Rather worry !

After joint, financial situation will improve !; September 19, 2009 6:16 AM
Anonymous said...: There was a private Anuity Fund who failed to pay!

Better diversified to CPF LIFE.; September 19, 2009 6:21 AM
Anonymous said...: 4000 is NOT for the rich . They won't get it anyway if they have landed property. The CPFLife won't work if you have opt out option.For this reason it can pay much more, double what the private insurers pay.
For the guy who wants to take out $117,000, please bite the bullet.I don't think you are a high earner. High earners don't bother and don't depend on CPFLife for retirement. Maybe this guy is desparate.The next thing he will be asking for the release of his medisave money

***ALERT***
That is nothing better and NO annuity better than the CPFLife.Please remember this , before you are conned into buying annuity from one company.; September 19, 2009 1:21 PM
Anonymous said...: If retiree wish to invest RA with a private Anuity, husband and wife must not invest TWO RA fund with ONE single company.; September 19, 2009 7:55 PM
Anonymous said...: CPF LIFE is neither for the richs who don't bother to take out $117,000 nor those poor who has less than $20,000 in his RA balance.

CPF LIFE is for those middle class who has above $40,000 in RA balance and has no other investment or saving in their bank accounts.

I am 54 this year, I am not qualify for the L-bonus. My plan is to defer draw down my RA monies (2009:$117,000 2010:$12x,xxx)later than 62. Experts said that 1 year defer = 2 years monthly instalments. If possible, I will defer my draw down age from 62 to 70. In that case, I will be able to enjoy my monthly payments beyond 90. My sons will get some of my RA balance even I died at age 90. Baby boomers who are not qualify for the L-bonus may consider this "alternative private pension" plan.; September 19, 2009 10:27 PM
Anonymous said...: I am the guy who wants to take out the $117,000. Actually I have 3 properties and earn a six figure sum annually. That's why the $4,000 amount is pure kachang puteh, more so even like crumbs from the kachang. Even the $117,000 is no skin off my nose. So there goes your theory about being poor or broke.

Anyback, back to the real issue at hand... I would rather manage my own money than let CPF manage it. Afterall, the $117,000 is our money to begin with.

So! Why let the govt continue to be the nanny? Those poor, financially uneducated folks in the HDB heartlands may continue to need the govt's help and are none the wiser to grow their money, and so be it for the status quo. But pur-leeze, don't make it out such that every Singaporean is as helpless and pathetic. There are rich, savvy and financially sound folks here too, and we are chagrinned at the govt's attitude of one size fits all.

Therein bears the crux of the question - Why should MY money go to subsidise the inefficient masses?; September 19, 2009 11:03 PM
Tan Kin Lian said...: Hi Bored (11:52 AM)
You can have a voice by electing an MP who will speak for your in Parliament. Do not invite a dumb MP.; September 20, 2009 7:19 AM
Tan Kin Lian said...: Hi Anonymous (11:03 PM
Since you have so much money, it is okay to leave the $117,000 with CPF. I also left my money with them. There is no need to manage every dollar on our own. Some money can be managed on our behalf.

In many countries, a large part of the life time savings is kept in a pension fund to be paid out as a monthly pension. Many people have their private savings which they manage on their own.

So, it is quite common for some money to be managed by the state and the rest to be managed on our own.; September 20, 2009 7:22 AM
Anonymous said...: Upper Class
Middle Class
-Middle upper
-Middle lower
Lower Class

Will a Superrich ($200m) ask the Rich ($20m)
"Why should MY money go to subsidise the rich?"; September 20, 2009 11:03 AM
Anonymous said...: To anonymous 11.03am it is apathetic folks like you that give Singaporeans a bad name. Soon you will find the rug pulled under you and you can only wonder... what happened?

To wise up, go read "Who Moved My Cheese".; September 20, 2009 11:30 PM