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Combining private annuity and CPF Life - does it make sense?

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Old 21-09-2017, 11:36 AM   #1
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Combining private annuity and CPF Life - does it make sense?

The premise of the above thought is that CPF Life is "the best annuity in the SG market".

If the above is true, one would want to leave the RA funds with CPF as long as possible BEFORE triggering CPF Life payouts, right? Currently the maximum age to trigger the CPF Life payouts is 70.

But if a person wants to retire at 60, then how?

I thought about it and was looking through NTUC's Sail plan.

My thought is, if I take up a private annuity (which I shall assume as the next best annuity in the SG market) and schedule the payout start age at 60, will I then be ,maximising the financial returns of the CPF LIfe scheme?

Basically as follows:

Age: 44
Buy lump sum pte annuity

Age 60
Pte annuity starts payout
Probable retirement age

Age 70
CPF LIfe starts payout

Age 80
Pte annuity stops payout (after 20 years)

> Age 80
CPF Life continues till death...

Does it make sense?

Last edited by ocs_woodlands; 21-09-2017 at 11:39 AM..
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Old 21-09-2017, 12:14 PM   #2
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Will you have funds stashed elsewhere aside from these 2 annuities?
Are you planning to select the CPF Life plan that gives increasing payouts every year?
Reason for asking is, have you considered the effects of inflation after age 80?
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Old 21-09-2017, 01:24 PM   #3
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Will you have funds stashed elsewhere aside from these 2 annuities?
Are you planning to select the CPF Life plan that gives increasing payouts every year?
Reason for asking is, have you considered the effects of inflation after age 80?
I will have other sources of retirement income ie rental. So I am using the rental as the inflation indexed component.

My question is basically:

Does it make sense to have 2 annuities to run sequentially with the lower interest/yield one paying out first and then years later, the higher interest/yield one paying out as late as possible?

By doing this, does it maximise the benefits accruing from CPF LIfe? (presumably the higher interest/yield annuity)
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Old 21-09-2017, 01:31 PM   #4
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I will have other sources of retirement income ie rental. So I am using the rental as the inflation indexed component.

My question is basically:

Does it make sense to have 2 annuities to run sequentially with the lower interest/yield one paying out first and then years later, the higher interest/yield one paying out as late as possible?

By doing this, does it maximise the benefits accruing from CPF LIfe? (presumably the higher interest/yield annuity)
Are you taking out the funds from cpf and putting them into private annuity?

If not, it shouldn't affect the yield.

If yes, then you're just earning lower returns using the same fund that could have been gaining more yield from CPF Life.

But usually, the approach you recommend is better for those that wants to start their retirement earlier than that set by cpf life
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Old 21-09-2017, 01:55 PM   #5
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....one would want to leave the RA funds with CPF as long as possible BEFORE triggering CPF Life payouts, right? Currently the maximum age to trigger the CPF Life payouts is 70.
If you can afford to do so, and if you are in reasonably good or better health, yes, it's prudent to wait until age 70.

But if a person wants to retire at 60, then how?
How about with ordinary savings and investments?

I thought about it and was looking through NTUC's Sail plan.
I've never found an investment product sold by an insurance company that is a good value. Maybe this one is the first unicorn ever found in the world, but somehow I doubt it.

If you're considering a private annuity then it, too, should perform an insurance function: longevity insurance. Even if you promptly boost your Retirement Account to the Enhanced Retirement Sum (ERS) when you turn age 55, and even if you defer CPF LIFE payouts until age 70, you might want more longevity insurance -- you might want a higher monthly payout, for life. Then it might make sense to buy a private annuity. NTUC is one of the companies in Singapore that happens to sell a lifetime annuity product, but it's not the product you named.
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Old 21-09-2017, 02:19 PM   #6
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Are you taking out the funds from cpf and putting them into private annuity?

If not, it shouldn't affect the yield.

If yes, then you're just earning lower returns using the same fund that could have been gaining more yield from CPF Life.

But usually, the approach you recommend is better for those that wants to start their retirement earlier than that set by cpf life
Just looking at SRS and cash for pte annuity - not CPF.

Yes, I maybe unwilling to work till 65 yo. So I am basically looking for a bridge for the period between retirement and when CPF Life commences, which can be anytime between 65 to 70.
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Old 21-09-2017, 02:23 PM   #7
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If you're considering a private annuity then it, too, should perform an insurance function: longevity insurance. Even if you promptly boost your Retirement Account to the Enhanced Retirement Sum (ERS) when you turn age 55, and even if you defer CPF LIFE payouts until age 70, you might want more longevity insurance -- you might want a higher monthly payout, for life. Then it might make sense to buy a private annuity. NTUC is one of the companies in Singapore that happens to sell a lifetime annuity product, but it's not the product you named.
I did some googling. The NTUC lifetime annuity product is something called Guaranteed Life Annuity?

Basically you are saying - do a private CPF LIfe (ie with lifetime payout) FIRST before doing a fixed payout term annuity, right?
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Old 21-09-2017, 03:07 PM   #8
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Another way is just pump a lot of money into CPF beyond ERS.
Then slowly drawdown those extra money bit by bit from age 55 to 65/70 instead of lump sum withdrawal.
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Old 21-09-2017, 03:17 PM   #9
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Basically you are saying - do a private CPF LIfe (ie with lifetime payout) FIRST before doing a fixed payout term annuity, right?
I don't think you should do a fixed payout term annuity at all. I think it'd make more sense to do something like this:

(a) Maximize CPF LIFE, yes. Choose the 2% annual increase payout option (for the inflation protection) when the time comes. If you don't need the money, and if you're in good health, start payouts at age 70.

(b) If you wish more annuity than CPF LIFE can provide, sure, shop around for another lifetime annuity. (NTUC and Tokio Marine offer them in Singapore, last I checked.) Start the payouts from retirement (e.g. age 60), and continue for life. For this particular annuity maybe you don't choose an inflation adjustment. I don't think this should be fixed term, because....

(c) For a fixed term "annuity," and for any remainder, just rely on your savings/investments. If you're trying to bridge a 10 year period, for example, you can do much better than the insurance company can/will. To pick an example, SRS funds invested in Singapore Government Securities (purchased at auction, held to maturity) would rival what an insurance company could provide. I'm not necessarily recommending SRS funds/bonds, but it's an option, at least in part.

A variation on (b) is to ask whether they have a joint/survivor annuity -- an annuity that pays out as long as one spouse, either spouse is still alive. A variation on (a), or an addition, is to make sure your spouse has a nice CPF LIFE annuity, too.
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Old 21-09-2017, 08:13 PM   #10
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Another way is just pump a lot of money into CPF beyond ERS.
Then slowly drawdown those extra money bit by bit from age 55 to 65/70 instead of lump sum withdrawal.
I wish I could pump a few hundred k into SA lol.... The problem is that both CPF SA and MA has ceilings beyond which the growth has to be organic.....

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Old 21-09-2017, 08:48 PM   #11
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I wish I could pump a few hundred k into SA lol.... The problem is that both CPF SA and MA has ceilings beyond which the growth has to be organic.....
I assume the suggestion is to pump money into CPF OA via the "all three" top-up option (CPF Form VC/1, or electronic equivalent). These top-ups must fit within the CPF Annual Limit of $37,740. If the MA and SA are "saturated," then these "all three" voluntary top-ups will actually flow into OA. OA earns 2.5% interest, sometimes a bit more.

Is there any other limit (besides the CPF Annual Limit) that would prevent someone from executing this particular maneuver?
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Old 21-09-2017, 11:11 PM   #12
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I am targeting SRS + CPF Life.

SRS at 85k. Should reach $150k 10 years later.
SRS 150k + FRS good enough?
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Old 21-09-2017, 11:16 PM   #13
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I did some googling. The NTUC lifetime annuity product is something called Guaranteed Life Annuity?

Basically you are saying - do a private CPF LIfe (ie with lifetime payout) FIRST before doing a fixed payout term annuity, right?
I read into the ntuc product... it seems to have an interesting exemption scheme,

Minimum sum exemption (For cash application only)
CPF member who has set aside Minimum Sum and purchased annuity policies using cash before reaching age 55 are allowed to seek
for Minimum Sum Scheme (MSS) Exemption if the annuity policies are able to provide a monthly income for retirement.
Exemption from Minimum Sum can only be granted to a CPF member age 55 and above if the Annuity policies satisfy the following conditions:
  1. The monthly annuity payment to the CPF member must be for life and will only cease upon the Death of the CPF member.
  2. The monthly annuity payment must commence at age no later than the draw down age (i.e. 62, 63, 64 and 65)
  3. The insurance company is agreeable to endorse the following clauses in the policy:
    • Where the Annuitant cancels the Annuity policy for cash surrender value the Company shall transfer all the money representing the surrender value of the annuity or an amount equal to the value of the Minimum Sum as determined by the CPF Board, to the Annuitant’s Retirement Account with the Central Provident Fund.
    • Where a loan of the cash surrender value of the policy is granted to the Annuitant, the CPF Board shall have a first charge on the policy to secure the refund of an amount equal to the Minimum Sum as determined by the CPF Board to the Annuitant’s Retirement Account with the Fund. The Company shall not be entitled to use part or all of any annuity payment falling due to repay the outstanding loan.
  4. If the monthly annuity payment is equal to or more than the CPF member’s cohort Minimum Sum monthly payment, full exemption can be granted. If not, CPF member will have to set aside a reduced Minimum Sum. This reduced amount may be in the form of cash or property pledge or both.
CPF members who wish to seek exemption for MSS are required to bring their policy document to CPF Board for approval. If the request is approved, the Board will write to the respective Insurance Company to pass endorsement on the annuity policy.


I wonder if this is still applicable for the current retirement sum scheme?

Last edited by intime; 21-09-2017 at 11:20 PM..
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Old 22-09-2017, 12:13 AM   #14
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I read into the ntuc product... it seems to have an interesting exemption scheme,

Minimum sum exemption (For cash application only)
CPF member who has set aside Minimum Sum and purchased annuity policies using cash before reaching age 55 are allowed to seek
for Minimum Sum Scheme (MSS) Exemption if the annuity policies are able to provide a monthly income for retirement.
Exemption from Minimum Sum can only be granted to a CPF member age 55 and above if the Annuity policies satisfy the following conditions:
  1. The monthly annuity payment to the CPF member must be for life and will only cease upon the Death of the CPF member.
  2. The monthly annuity payment must commence at age no later than the draw down age (i.e. 62, 63, 64 and 65)
  3. The insurance company is agreeable to endorse the following clauses in the policy:
    • Where the Annuitant cancels the Annuity policy for cash surrender value the Company shall transfer all the money representing the surrender value of the annuity or an amount equal to the value of the Minimum Sum as determined by the CPF Board, to the Annuitant’s Retirement Account with the Central Provident Fund.
    • Where a loan of the cash surrender value of the policy is granted to the Annuitant, the CPF Board shall have a first charge on the policy to secure the refund of an amount equal to the Minimum Sum as determined by the CPF Board to the Annuitant’s Retirement Account with the Fund. The Company shall not be entitled to use part or all of any annuity payment falling due to repay the outstanding loan.
  4. If the monthly annuity payment is equal to or more than the CPF member’s cohort Minimum Sum monthly payment, full exemption can be granted. If not, CPF member will have to set aside a reduced Minimum Sum. This reduced amount may be in the form of cash or property pledge or both.
CPF members who wish to seek exemption for MSS are required to bring their policy document to CPF Board for approval. If the request is approved, the Board will write to the respective Insurance Company to pass endorsement on the annuity policy.


I wonder if this is still applicable for the current retirement sum scheme?
Yes, a private annuity that pays a monthly sum >= CPF life sums ill allow one to be exempt from CPF Life..... But it says purchased using cash. I wonder annuities purchased using cash + srs can or not...

https://www.cpf.gov.sg/members/schemes/schemes/retirement/retirement-sum-scheme

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Old 22-09-2017, 09:37 AM   #15
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I don't think you should do a fixed payout term annuity at all. I think it'd make more sense to do something like this:

(a) Maximize CPF LIFE, yes. Choose the 2% annual increase payout option (for the inflation protection) when the time comes. If you don't need the money, and if you're in good health, start payouts at age 70.

(b) If you wish more annuity than CPF LIFE can provide, sure, shop around for another lifetime annuity. (NTUC and Tokio Marine offer them in Singapore, last I checked.) Start the payouts from retirement (e.g. age 60), and continue for life. For this particular annuity maybe you don't choose an inflation adjustment. I don't think this should be fixed term, because....

(c) For a fixed term "annuity," and for any remainder, just rely on your savings/investments. If you're trying to bridge a 10 year period, for example, you can do much better than the insurance company can/will. To pick an example, SRS funds invested in Singapore Government Securities (purchased at auction, held to maturity) would rival what an insurance company could provide. I'm not necessarily recommending SRS funds/bonds, but it's an option, at least in part.

A variation on (b) is to ask whether they have a joint/survivor annuity -- an annuity that pays out as long as one spouse, either spouse is still alive. A variation on (a), or an addition, is to make sure your spouse has a nice CPF LIFE annuity, too.

i never knew there was sucha thing - "joint/survivor annuity"...

which provider has this?
i think its useful... esp one has a non-working younger spouse?
interesting to know what the premiums would be.
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