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

BBCWatcher

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Yes, Tokio Marine Singapore offers joint/survivor annuities. I’m not totally thrilled with them — they’re unnecessarily complicated, in my view, with (for example) a variable “bonus” payout element, exactly what you DON’T want in an annuity — but they exist. (NTUC Income has much the same problem.) They also do not appear to offer any inflation adjusted payout option.

Annuities don’t have to be complicated, but welcome to Singapore. :s12:

As mentioned, annuity insurance in Singapore is pretty weak if you’re trying to buy largish annuities. (Although you can work around the limit to some extent.) It could make a lot of sense to combine CPF LIFE with a high quality, better insured, simpler annuity obtained offshore. The latter would not be denominated in Singapore dollars, but I don’t think that’s a huge problem as long as you get an inflation adjusted payout in a major currency and make the payout big enough. This way you’re also defending against national risks. They also happen to be better values since the overseas markets are bigger and more competitive.
 

sg_investor

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what are the endowment rates when real interest rates is high?
for example in 2006 interest rate was 3% and Fed rate was 5%, what do you get if you signup an endowment plan? will it be higher than 3% or 5% (US)?
 

Joel_l

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I have a private annuity plan that I bought to augment my cpf payout. I would say don't look at what you hope to retire with as a whole amount I.e $5000.

Look at it at small bites. So for example if you wish to retire with $5000.
CPF ERS: $2500
Private Annuity: $1000
Dividend payout from Equities: $1000
Cash drawdown / cpf OA : $500

In this manner if any of the parts fail to materialise due to unforeseen circumstances, there will be fall backs.


Looking at what my agent generate for me and extrapolating - you need about $100k with an accumulation period of 15 years for lifelong $500pm payout....

Sent from Common Sense using GAGT
 

Brian811

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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?

So may i know which annuity plan is the best please?
 

maple96

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TS:

1. first make sure u have a good understanding of how CPF life works
2. understand the risk/reward of a pte annuity plan
3. do u have dependents, do u expect to live beyond 90 (based on family history)
4. what other sources of income/funds u have after retirement?

How much do u know about CPF Life, your CPF accounts at 55, etc?

Which CPF life plan do u plan to choose? Do u understand the pros and cons of the 3 types of plans?

Which pte annuity can pay at least 2.5% - 4% returns (using CPF OA and CPF Life as benchmark)
 

foozgarden

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I have a private annuity plan that I bought to augment my cpf payout. I would say don't look at what you hope to retire with as a whole amount I.e $5000.

Look at it at small bites. So for example if you wish to retire with $5000.
CPF ERS: $2500
Private Annuity: $1000
Dividend payout from Equities: $1000
Cash drawdown / cpf OA : $500

In this manner if any of the parts fail to materialise due to unforeseen circumstances, there will be fall backs.

CPF ERS payout 2.5k?
 

BBCWatcher

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CPF ERS payout 2.5k?
Yes, that's correct, or even a bit conservative.

If the ERS is achieved precisely at age 55 ($249,000 in 2017 dollars) -- the Retirement Account is formed with the FRS ($166,000 in 2017 dollars), and then a top-up is made to the ERS on the member's 55th birthday (for example) -- and if payouts are then deferred until age 70, then the CPF LIFE Standard Plan will generate a minimum of $2,497 (fixed, nominal) according to CPF's own online calculator.
 

WWH123

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i was shown a Universal Plan that starts monthly payout at 60
Single Premium $250k
Initial Outlay $70k
Loan $180k
Monthly interest payable to bank $248
 

parallelyy

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i was shown a Universal Plan that starts monthly payout at 60
Single Premium $250k
Initial Outlay $70k
Loan $180k
Monthly interest payable to bank $248
I don't think universal life plan is a good instrument for your retirement income. It's mechanism is very similar to that of ILPs
 

Joel_l

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TS:

1. first make sure u have a good understanding of how CPF life works
2. understand the risk/reward of a pte annuity plan
3. do u have dependents, do u expect to live beyond 90 (based on family history)
4. what other sources of income/funds u have after retirement?

How much do u know about CPF Life, your CPF accounts at 55, etc?

Which CPF life plan do u plan to choose? Do u understand the pros and cons of the 3 types of plans?

Which pte annuity can pay at least 2.5% - 4% returns (using CPF OA and CPF Life as benchmark)


I won't even consider the return of 2.5%. Compare them at 4%, only being fair and accurate...
 

computers70

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i was shown a Universal Plan that starts monthly payout at 60
Single Premium $250k
Initial Outlay $70k
Loan $180k
Monthly interest payable to bank $248

it used to be a popular solution, when life plans were paid for life. Now with so many limited pay options, I guess Universal life is redundant., for most people.

But they still cater to a group of wealthy clients, who are looking to insure more than a million and also have enough cash to do a single premium or a loan like above. Looks like your coverage could be around d 1 mill-2 mill.
 

ocs_woodlands

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An update.

After considering pte annuities for 1 month, I have decided NOT to buy pte annuities.

I have found the payouts are poor compared to cpf life.

This is a sample of what I found.

Using mnaulife as eg.

Manulife
Put in 46k @ 44 yo and start payout @ 65 till 90 - monthly payout $300

Cpflife
Put in 161k @ 55yo and start payout @ 65 onwards - monthly payout of $1270 (avg of basic and std).

161k/46k = 3.5
$1270/3.5 = $360.

$360/$360 = 1.2 ie Manulife is paying 20% lower monthly payouts compared to Cpflife AND it has a head start of 10 years (from 44 - 65) before payout starts compared to Cpflife (from 55 - 65)... so it seems like pte annuities compare poorly to Cpflife.

The issue for me is more like what instrument to use to bridge the gap between 60 to 65 ie between my desired retirement age and Cpflife payout age....

Sent from Common Sense using GAGT
 
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raysdad

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An update.

After considering pte annuities for 1 month, I have decided NOT to buy pte annuities.

I have found the payouts are poor compared to cpf life.

This is a sample of what I found.

Using mnaulife as eg.

Manulife
Put in 46k @ 44 yo and start payout @ 65 till 90 - monthly payout $300

Cpflife
Put in 161k @ 55yo and start payout @ 65 onwards - monthly payout of $1270 (avg of basic and std).

161k/46k = 3.5
$1270/3.5 = $360.

$360/$360 = 1.2 ie Manulife is paying 20% lower monthly payouts compared to Cpflife AND it has a head start of 10 years (from 44 - 65) before payout starts compared to Cpflife (from 55 - 65)... so it seems like pte annuities compare poorly to Cpflife.

The issue for me is more like what instrument to use to bridge the gap between 60 to 65 ie between my desired retirement age and Cpflife payout age....

Sent from Common Sense using GAGT

Did not read entire thread but have you looked at TM Retirement GIO sold by banks like BOC? I did buy a bunch of this (and for my wife too to capitalise on SDIC protection; 50k per name per insurer).. to bridge between 55 and 65. The vague data I remembered: I'm 45, pay for 5 years (20% each time), 5 year accumulation , at 55 start paying annual interest at around 4.75% (out of which 1/3 (1.8%) is guaranteed but they have a history of paying full 4.75%) and this is pure yield (not yield + drawdown as in many retirement plans).... at 55 your surrender/death benefits are also guaranteed (i.e. more than premiums paid from now on)... pay for Life ( I think)...

pls verify with any TM agents or BOC....

from 60 to 65, I have seen a few retirement models by professional FA using immediate annuities or cash to draw down to meet monthly cash requirement... not sure if this is the wisest plan as I normally aim to preserve capital as much as possible (don't know why myself)... so I use above annuity instead + other non-annuities methods I already implemented to supplement (trade/invest, properties rental , interest from FDs) ... still exploring other ways..
 
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henrylbh

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Without comparison, I dare say no private annuity is better than CPF Life except that you can liquidate private annuity (with loss) anytime you like.
 

BBCWatcher

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Without comparison, I dare say no private annuity is better than CPF Life except that you can liquidate private annuity (with loss) anytime you like.
You could get at least pretty close if you’re wiling to consider lifetime annuities sold outside Singapore, but you’d still not be able to replicate CPF LIFE’s sterling creditworthiness (a AAA rated sovereign), Singapore dollar denominated payout, and Singapore tax advantages. You will be able to do better in terms of joint/survivor payouts and true inflation indexed payouts, although the latter will be keyed to another country’s price index.

But that’s not really how you should approach this analysis. Yes, start with CPF LIFE as your longevity insurance foundation. Then decide whether you need additional longevity insurance. CPF LIFE’s maximum monthly payout is rather modest, and you might need more, even after you include your spouse’s/partner’s maximum CPF LIFE coverage in the picture. If you do need more, go shopping for additional coverage and get the best value coverage (which is not the same thing as lowest priced, since creditworthiness is important). OK, maybe that additional coverage isn’t as terrific a value as CPF LIFE, but so what? You need more, so do the best you can.
 

blurpandasg2014

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Which annuity got the highest guaranteed component and pays for whole life?

I know ntuc vivocash has the highest reinvestment rate currently
 

BBCWatcher

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Which annuity got the highest guaranteed component and pays for whole life?
That's very hard to answer without at least a few parameters. Which lifetime annuity in Singapore, or globally? What's the minimum Moody's or S&P insurer rating you are willing to accept? And what currency(ies) are acceptable?
 

Bigoya

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Which annuity got the highest guaranteed component and pays for whole life?

I know ntuc vivocash has the highest reinvestment rate currently

Vivocash pays till max 100, MyRetirementChoice pays till max 95.
I think that'd be good enough considering the longer the payout last, the less meaningful the payout becomes (due to inflation).
 

Bigoya

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If you're talking about Guaranteed portion, that would be Manulife

you hear from who? :s13:

Did an actual calculation for u, based on Guaranteed and Projection at 4.75%.

Aviva:
15yr payout yield: 2.39% p.a. to 4.32% p.a.
25yr payout yield: 2.64% p.a. to 4.36% p.a.
35yr payout yield: 2.63% p.a. to 4.40% p.a.

Manulife:
25yr payout yield: 2.56% p.a. to 4.22% p.a.

I think it's quite obvious which is better now?
 
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