Tan Kin Lian's Blog: Compulsory Annuity

Friday, August 31, 2007

Compulsory Annuity

Dear Mr Tan,

I refer to the government proposed compulsory annuity for those below 50 years and payable after 85 years.

How will this be fair to those who are currently in poor health which will
impact their longevity? What is the criteria for poor health, if such people can be exempted from the scheme?

Although in theory and policy it looks good, is it practical and fair to implement and administer such a scheme which is across the board?

REPLY:

I do not have the solution to your particular situation. Anyway, the compulsory scheme will only take effect in 15 years time. It may be too early to declare that a particular person is in poor health.

4 comments:

Anonymous said...: The proposed annuity plan cannot have an opt out option. It is unfortunate there are some who are well off and don't need it. They are to be part of the scheme for it to work, rich or poor , healthy or unhealthy. The rich support the poor and the unhealthy support the healthy. This may look unfair. But if the scheme allows opt out there will be many who will unwittingly opt out for a lot of reasons. My fear is there will be many who will be influenced and waylaid by insurance agents.
Good news or bad news my estimate is about $3000(deducted from minimum sum at 55) will be enough to provide the $400 monthly annuity after 85 to 105 years old if the assumption that all will not survive beyond this age.I am sure $3000 is no big deal when you know that it will go to provide to those who live longer than you or it may be yourself who will live long.
Give and take and consider it as expense for an insurance.; August 31, 2007 10:04 PM
Anonymous said...: It would supplement the compulsory annuity if we can some control of the use of CPF fund. Currently, the control isn't good ,it still gives almost free rein to the members. The capping of the usage for various purposes needs further tweaking.Example, for housing. The 120% limit is not good enough because people are buying houses bigger than they need and over stretch their fund .This leaves little or nothing for other areas like accumulation for retirement .
Members still need to grow their fund because the minimum sum for annuity just provides subsistence living.
Another area needs tweaking is using the fund for investment.As you have noticed from all reports of CPF investment very few members made profit and if they did it was
just above 2.5%.If this is so, members may as well leave their fund in the CPF to grow at 2.5% without the unnecessary risk they have been taking.
I propose that CPF make it compulsory for members who wish to invest to invest directly into some life cycle funds run by CPF or approved by CPF, otherwise leave it in CPF.This is to prevent abuses, mismanagement and losses in the hands of insurance sales agents who have no idea about investing but sales. With this in place, I believe members can earn as high as 6% to 8% rate of return, easily.
Cut out all intermediaries (agents, advisers, stock brokers etc) and go direct. The saving of cost will add to the return. It has proven again and again the intermediaries have done nothing but damages.; September 01, 2007 2:47 PM
Anonymous said...: Another kudos to the Government. This time is unlocking the equity of the house for retirement and longevity insurance. I thought those who are already above 55 or now above 62 will miss the compulsory annuity and be left out . Thank goodness they are not forgotten.
It is some kind of reverse mortgage but not exactly. It is a buyback of the tail end lease and convert to one lump as first payment , followed by some thing like annuity certain till 85 and thereafter if one lives beyond will receive a perpetual annuity from the longevity insurance like the one proposed by CPF.
From what i know of the retirement schemes around the world the CPF and HDB schemes will be hard to match.No taxes needed to raise to fund the scheme. Of course there will be grouses. No scheme is perfect and can satisfy everybody especially in whining and complaining Singapore.
Even a free dole scheme will have
grumpy and whining people.; September 01, 2007 4:27 PM
Thomas Phua's Blog said...: 1.Those who have no cash to buy annuity will do well to use Minimum Sum to do the annuity.

2.Those who has spare cash, should use spare cash to do Annuity and leave the Minimum Sum for draw down.

3.The Government should exempt those who has annuity plan to be exempted from compulsory annuity.

- Thomas Phua; September 02, 2007 7:39 PM