CPF Life Annuity Premium

[deathman91]

My dad recently has deduction from his Retirement Account(RA) under CPF Life Annuity Premium(CLA). Anyone know what is happening here?

 

[nixdrst]

My dad recently has deduction from his Retirement Account(RA) under CPF Life Annuity Premium(CLA). Anyone know what is happening here?

How much was the premium if i may know?

 

[deathman91]

How much was the premium if i may know?

5k +

 

[lzydata]

Based on the amount withdrawn, I'm going to guess he is under the Basic Plan:

3.2 CPF LIFE Basic Plan

3.2.1 What happens if I choose the CPF LIFE Basic Plan?

We will take the annuity premium from your RA in two instalments.

When you are 55 years old, we will deduct a small portion of your RA savings as the first instalment of your annuity premium. The rest of your RA savings will stay in your RA.

One to two months before your DDA, we will deduct a small portion of any new money that has built up in your RA between your 55th birthday and your DDA as the second instalment of your annuity premium.

When you reach your DDA, you will receive monthly payouts (paid from your RA) starting up until one month before you reach 90 years old. Once you reach 90 years old, you will continue to receive monthly payouts (paid from the annuity fund) for as long as you live.

Please see Section 7 – Case Studies on numerical examples for CPF LIFE Basic Plan.

3.2.2 How much will you deduct as the annuity premiums if I choose the LIFE Basic Plan?

The amount we deduct will be about 10% for a member reaching age 55 in 2013. The actual percentage will depend on your age and whether you are male or female.

We will tell you the exact amount of annuity premium we will deduct from your RA when your LIFE Basic Plan is issued.

...

7 Case studies

Case 1: Mr Tan’s background

Mr Tan is a Singaporean who will be 55 in January 2014. He has $100,000 in his RA and will be placed on CPF LIFE. He can choose between the two existing plans (the LIFE Standard Plan or the LIFE Basic Plan).

...
Option 2: If he chooses the LIFE Basic Plan

When Mr Tan reaches 55 years old, we will deduct approximately 10% of $100,000 from his RA as the first annuity premium for his LIFE Basic Plan. The rest of Mr Tan’s RA savings will stay in his RA until his DDA.

Between 55 years old and his DDA, Mr Tan could have new money paid into his RA. We will deduct approximately 10% of this new money from the RA as the second annuity premium about one to two months before Mr Tan’s DDA.

When he reaches 65 years old, Mr Tan will receive a monthly payout of between $734 and $812 from his RA until his 90th birthday. The amount of monthly payout that Mr Tan could receive is based on the assumption that there is no new money paid into his RA other than the 1% extra interest between Mr Tan’s 55th birthday and his DDA (65).

When Mr Tan reaches 90 years old, he will start to receive a monthly payout of between $734 and $812 from his LIFE annuity. The monthly payout includes a payout of about $50 from the extra interest which is paid from the RA for as long as it is being earned.

Depending on how old Mr Tan is on the date of his death, his beneficiaries may receive bequests as shown below.

How old Mr Tan is on the date of his death | Bequest
65 $145,525 to $152,453

75 $105,506 to $111,892

85 $47,955 to $50,689

- http://mycpf.cpf.gov.sg/NR/rdonlyres/09EA0C05-C8E9-4705-9D91-E8BD1D12CF1E/0/LIFEBrochure.pdf

This is the CPF LIFE booklet linked from here.

 

[deathman91]

Based on the amount withdrawn, I'm going to guess he is under the Basic Plan:



- http://mycpf.cpf.gov.sg/NR/rdonlyres/09EA0C05-C8E9-4705-9D91-E8BD1D12CF1E/0/LIFEBrochure.pdf

This is the CPF LIFE booklet linked from here.

Thanks! Hit the nail!

 

[nixdrst]

Based on the amount withdrawn, I'm going to guess he is under the Basic Plan:



- http://mycpf.cpf.gov.sg/NR/rdonlyres/09EA0C05-C8E9-4705-9D91-E8BD1D12CF1E/0/LIFEBrochure.pdf

This is the CPF LIFE booklet linked from here.

What is this premium for? This is the fee for the annuity plan that we have to pay to government?
Seems a lot for 10% commission

 

[deathman91]

What is this premium for? This is the fee for the annuity plan that we have to pay to government?
Seems a lot for 10% commission

From my understanding, for basic plan, the premium paid is to be used after age 90. I am not sure how it works for the standard plan though.

 

[lzydata]

What is this premium for? This is the fee for the annuity plan that we have to pay to government?
Seems a lot for 10% commission

These are not commissions, these are the premiums for the annuity.

All this is from the booklet:
Under the Basic plan, the premium is paid in two instalments, 10% of the RA at age 55 and 10% of the RA just before the DDA. The rest of the money stays inside the RA or, if it has been withdrawn for property, in the pledged property until the DDA. The payouts from age 65 to 90 are covered by money in the RA plus interest; the payouts from age 90 are covered by the annuity. So actually only about 20% of the MS goes to buy the annuity; the rest is paid out monthly like the old Minimum Sum Scheme.

Under the Standard plan, all money in the RA goes to the annuity premiums. The first instalment is paid at age 55, up to half of the MS, and the second instalment at DDA, with the remainder of the RA. All payouts from 65 onwards come from the annuity.

 

[chopra]

Lzydata, thanks for the clarification.
Alot clearer now.

1. Think there is a typo. Should be 20% of RA (not ms)
2. The commission for this LIFE plan is a subset of the premium paid. It's however not clear how much this commission is....

 

[anfielder]

Lzydata, thanks for the clarification.
Alot clearer now.

1. Think there is a typo. Should be 20% of RA (not ms)
2. The commission for this LIFE plan is a subset of the premium paid. It's however not clear how much this commission is....

There shouldn't be any commission since there's no middleman? But there'll be admin charges to cover the costs of running the plan.

 

[nixdrst]

These are not commissions, these are the premiums for the annuity.

All this is from the booklet:
Under the Basic plan, the premium is paid in two instalments, 10% of the RA at age 55 and 10% of the RA just before the DDA. The rest of the money stays inside the RA or, if it has been withdrawn for property, in the pledged property until the DDA. The payouts from age 65 to 90 are covered by money in the RA plus interest; the payouts from age 90 are covered by the annuity. So actually only about 20% of the MS goes to buy the annuity; the rest is paid out monthly like the old Minimum Sum Scheme.

Under the Standard plan, all money in the RA goes to the annuity premiums. The first instalment is paid at age 55, up to half of the MS, and the second instalment at DDA, with the remainder of the RA. All payouts from 65 onwards come from the annuity.

Thanks Izydata for the clarification.

So for standard plan: 50% of RA will be taken out at 55, and rest at 65 (taken out means out of CPF/RA entirely right?)
For basic plan: 10% of RA will be taken out at 55, and another 10% at 65
Payouts for basic plan from 65-90 yo will be direct from RA

Sounds to me basic plan is the better deal, payout is only $100 less per mo but the bequest is much higher.