About annuities

[Millimeter]

Hi everyone

I recently started a blog about retiring in Singapore. Felt that retirement is a very important thing that we all need to prepare for once we start working, but many of my peers had no idea about how to do this and often postpone it till later ages. A lot of media articles also kept talking about how Singaporeans are ill-prepared for retirement.

So I thought I'd start a blog and share what I know about retirement! Hopefully through this process I'd learn from my readers as well

My latest post is about annuities and what such plans can do to help. Do take a look and provide your comments:

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The term ‘annuity’ is probably quite foreign to most financial newbies. But don’t worry! I’m here today to share some basic information about annuity plans that you will find very useful in your retirement planning!

What is an annuity plan?

An annuity is a type of insurance policy that most people purchase to finance their retirement needs. As we start to live longer lives, the risk of us outliving our retirement savings increases. Annuities guard against this risk by providing guaranteed payouts for the rest of our lives.

The amount of payouts would depend on the principal sum and interest generated on the principal sum.

There are 2 types of annuities, immediate annuities and deferred annuities. You can purchase either of the plans by cash or with your CPF money. I will explain what else you can do with your CPF money in a future post.

The first type of annuity plans is the immediate annuity plan.

When you purchase an immediate annuity, you can expect to receive the first payout shortly after the purchase. For example, if you put a lump sum of $100,000 into an immediate annuity plan in January 2014, you can expect monthly payouts to begin from February 2014. This would last for the rest of your life.

Click here to read more.

 

[Dividends Moderator]

Hey Millimeter,

Thanks for this piece of info

Cheers,
D.M

 

[w1rbelw1nd]

Let me guess... You sell annuities?

 

[Millimeter]

Let me guess... You sell annuities?

Ehhhh I'm sorry to disappoint you but I don't sell annuities

If you wanna buy you can look into some of these companies which I listed in my blogpost

Just trying to share info that I know, and hopefully learn from others too!

 

[Dividends Moderator]

Let me guess... You sell annuities?

Heya what does this mean

 

[henrylbh]

For the same given sum of money, anyone knows of any annuity plan that is better than CPF min sum scheme thats last about 20 years from from before age 65 or CPF Life that lasts till death from age 65?

 

[Mecisteus]

the returns from annuities should not be any better from the returns you get from endowments. in fact, it should be even lower because you are taking back your principal amounts earlier and regularly unlike an endowment which is locked up for a very long period ie >20 years.

and how much are the long term returns of an endowment? probably lower than 3 to 5%.

 

[Millimeter]

Thanks!

Possible to share more about these endowments? I think both annuities and endowments are respectable options for people who are risk-averse though

 

[No use for a Name]

Isn't that perpetuity ?
Annuities from my understanding, is fixed equal payout of a sum of money in a given period of time.
Whereas perpetuators are fixed equal payments of payout that last for a lifetime until you die.

 

[tiny]

For the same given sum of money, anyone knows of any annuity plan that is better than CPF min sum scheme thats last about 20 years from from before age 65 or CPF Life that lasts till death from age 65?

Yes. I believe it has been answered a few times in older threads.

Tokio Marine Retirement Plan.

 

[phone987]

Yes. I believe it has been answered a few times in older threads.

Tokio Marine Retirement Plan.

How can that be?
CPF - Put in $155K at age 55, ten years later payout is abt $1.2K per month till death.
Can TM match the same payout per month?

 

[Millimeter]

How can that be?
CPF - Put in $155K at age 55, ten years later payout is abt $1.2K per month till death.
Can TM match the same payout per month?

I'd be very interested if any company can match that!

 

[wts2013]

I'd be very interested if any company can match that!

who dares, hahaha

 

[Lewis.T]

Get an annuity only if you think you will live a long life (past 85 perhaps). A plan from my side requires $148,712 single premium at age 55, to give you a projected total of $333,820 from age 65 to 85. To put it into perspective, CPF LIFE would have given you $1200 x 20 x 12 = $288,000 till then, and is almost $7k more expensive in terms of single premium.

For the naysayers who say this is just projected, we have been doing well, even during 2008. But of course, past performance is not an indicator of future performance.

CPF Life, strangely enough, has nothing guaranteed. Not a single dollar. But we trust our government right?

 

[sandwicher]

Get an annuity only if you think you will live a long life (past 85 perhaps). A plan from my side requires $148,712 single premium at age 55, to give you a projected total of $333,820 from age 65 to 85. To put it into perspective, CPF LIFE would have given you $1200 x 20 x 12 = $288,000 till then, and is almost $7k more expensive in terms of single premium.

For the naysayers who say this is just projected, we have been doing well, even during 2008. But of course, past performance is not an indicator of future performance.

CPF Life, strangely enough, has nothing guaranteed. Not a single dollar. But we trust our government right?

You're meaning to say Prudential's plan has "something guaranteed"? Unless some joker party takes over the Parliament and starts messing around with the system, I would think most Singaporeans do trust CPF Life more than private companies?

 

[Lewis.T]

Sure, all par plans have a guaranteed component.

CPF Life is subject to change at any time, including the payouts (of which Prudential also has a risk, based on investment performance), structure, and date of first payouts etc etc. It is a plan still in it's infancy, not legally bound to you or set in stone by any paper or documentation. I'm not saying our government is dubious by nature and won't give you money, but there will likely be changes, perhaps major ones which will affect existing CPF Life members and upcoming members.

 

[Millimeter]

Sure, all par plans have a guaranteed component.

CPF Life is subject to change at any time, including the payouts (of which Prudential also has a risk, based on investment performance), structure, and date of first payouts etc etc. It is a plan still in it's infancy, not legally bound to you or set in stone by any paper or documentation. I'm not saying our government is dubious by nature and won't give you money, but there will likely be changes, perhaps major ones which will affect existing CPF Life members and upcoming members.

Hm, I think these are very fair points. However, I would trust the government much more than a for-profit company to be honest

 

[Dividends Moderator]

Sure, all par plans have a guaranteed component.

CPF Life is subject to change at any time, including the payouts (of which Prudential also has a risk, based on investment performance), structure, and date of first payouts etc etc. It is a plan still in it's infancy, not legally bound to you or set in stone by any paper or documentation. I'm not saying our government is dubious by nature and won't give you money, but there will likely be changes, perhaps major ones which will affect existing CPF Life members and upcoming members.

I concur, in fact, under the Insurance Union, there is no policy to enforce 'guaranteed' or 'projected returns'. While our garment's plan are doing good, not many are appreciative though (personal encounter)

D.M

 

[Lewis.T]

I concur, in fact, under the Insurance Union, there is no policy to enforce 'guaranteed' or 'projected returns'. While our garment's plan are doing good, not many are appreciative though (personal encounter)

D.M

I beg to differ, you may not have fully understood the laws and regulations that protect a policy owner. Policies drafted have to be approved by the Life Insurance Association of Singapore, sort of a insurance arm of the Monetary Authority of Singapore, and things that are approved, are laws, not just guidelines.

If the policy states that there is a guaranteed portion, you will most certainly get it even if the company goes bankrupt. That is what the capital adequacy ratio is for, and on top of that, you are double protected by our lovely government, via SDIC, for up to $50k.

Thirdly, you may find this interesting. The 4.75% and 3.25% you see on the projections means that if the fund of that particular plan performs at those percentages on average, you will get the stated amount listed under that column.

Fourth point to make, if a company does not honour it's payouts to even one batch of policy holders, I'd imagine a class action lawsuit would be coming, as well as the rapid decline of reputation of that company, which in turn will make the company lose a hell of a lot more than it would have paying the policy owners.

 

[Millimeter]

I beg to differ, you may not have fully understood the laws and regulations that protect a policy owner. Policies drafted have to be approved by the Life Insurance Association of Singapore, sort of a insurance arm of the Monetary Authority of Singapore, and things that are approved, are laws, not just guidelines.

If the policy states that there is a guaranteed portion, you will most certainly get it even if the company goes bankrupt. That is what the capital adequacy ratio is for, and on top of that, you are double protected by our lovely government, via SDIC, for up to $50k.

Thirdly, you may find this interesting. The 4.75% and 3.25% you see on the projections means that if the fund of that particular plan performs at those percentages on average, you will get the stated amount listed under that column.

Fourth point to make, if a company does not honour it's payouts to even one batch of policy holders, I'd imagine a class action lawsuit would be coming, as well as the rapid decline of reputation of that company, which in turn will make the company lose a hell of a lot more than it would have paying the policy owners.

Hey thanks for sharing these - never knew we were so protected by the government lol.

The percentages on your third point refers to those in the tables? Like minimum and average performances of the fund? If the fund doesn't perform then how?

Also, are there class action suits in SG? Never seen it I think haha.