Manulife SteadyPayout

[surefire888]

IRR % if the policy holder dies within x years -

1st Yr	2nd Yr	3rd Yr	4th Yr	5th Yr	6th Yr	7th Yr	8th Yr	9th Yr
$ (100,000)	$ (100,000)	$ (100,000)	$ (100,000)	$ (100,000)	$ (100,000)	$ (100,000)	$ (100,000)	$ (100,000)
$ 101,000	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450
1.00%	$ 87,550	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450
	0.53%	$ 74,100	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450
		0.38%	$ 60,650	$ 13,450	$ 13,450	$ 13,450	$ 13,450	$ 13,450
			0.31%	$ 47,200	$ 13,450	$ 13,450	$ 13,450	$ 13,450
				0.27%	$ 33,750	$ 13,450	$ 13,450	$ 13,450
					0.25%	$ 20,300	$ 13,450	$ 13,450
						0.24%	$ 13,450	$ 13,450
							​ 1.66%​	$ 13,450
								​ 4.00%​

Need to survive at least 8 years to earn 4% interest rate.

The best is to die at the beginning of 9th year. IRR can be slightly above 4.00% due to early payment of yearly payout.

I got slightly different numbers from you. It seems like you are using 101% for the death benefit calculations instead of 105%?

Also, there should still be death benefit if the person dies the day after receiving the 8th payout and this would be the highest IRR

Can't paste my Excel because i haven't checked which is the best site to host the image

 

[BlueRobin]

I thot if the person dies b4 8th year, he will receive what is left of the remaining principal that has not been paid. The full principal is not intended to be paid out in one lump sum.

When I contacted my regular agent (who works for an agency that could sell products from different companies) about this product, the first reaction was very positive, after a few hours when the agent found out this could only be sold by Manulife direct agent, the comment about it turned negative. Trying to imply it is not really 4%.

Got a feeling many don't read the details and just rubbish a product for whatever reasons. My take is if one is interested, invest some time on understanding the product before you invest your money. Other's opinion is just theirs, DYODD.

 

[CaptainWu]

I got slightly different numbers from you. It seems like you are using 101% for the death benefit calculations instead of 105%?

Also, there should still be death benefit if the person dies the day after receiving the 8th payout and this would be the highest IRR

Can't paste my Excel because i haven't checked which is the best site to host the image

Yes it is 105%. If all focus on death benefit then the IRR will be high in the first few years (3-5%) then gradually go down to low range of 1.2% and up again till the 8th year where this could hit 4.1% then eventually 4% when matured.

 

[BBCWatcher]

It’s hard to figure out who should buy this product. I don’t see how it really works for SRS drawdowns. Does anyone really have a single cash premium they could pay from SRS? If they do, they may have bigger problems.

The best I can come up with is someone around age 59+ who’s looking for a fuss free “bridge” to CPF LIFE income from age 70 who has too much cash lying about, probably as OA dollars. (The timing of this product’s introduction suggests that’s exactly what Manulife has in mind, that it’s aimed at people who’ve maxed out their RAs who mourn the loss of SA.) But this person still needs to take 10 years of inflation into account. The level payouts aren’t ideal for these purposes. This could also work decently for people who want to plow the payouts into their maxed out RAs every time the ERS is raised.

 

[sglandscape]

It’s hard to figure out who should buy this product. I don’t see how it really works for SRS drawdowns. Does anyone really have a single cash premium they could pay from SRS? If they do, they may have bigger problems.

The best I can come up with is someone around age 59+ who’s looking for a fuss free “bridge” to CPF LIFE income from age 70 who has too much cash lying about, probably as OA dollars. (The timing of this product’s introduction suggests that’s exactly what Manulife has in mind, that it’s aimed at people who’ve maxed out their RAs who mourn the loss of SA.) But this person still needs to take 10 years of inflation into account. The level payouts aren’t ideal for these purposes. This could also work decently for people who want to plow the payouts into their maxed out RAs every time the ERS is raised.

You may have missed the point that you have to withdraw from SRS over a 10 year cycle to maximise the tax savings. The SRS scheme tend to be biased towards people who have adequate savings (which would have also been in OA/SA), and hence I highly doubt it'll appeal to the "bridge" to CPF Life.

 

[DevilPlate]

When I contacted my regular agent (who works for an agency that could sell products from different companies) about this product, the first reaction was very positive, after a few hours when the agent found out this could only be sold by Manulife direct agent, the comment about it turned negative. Trying to imply it is not really 4%.

Got a feeling many don't read the details and just rubbish a product for whatever reasons. My take is if one is interested, invest some time on understanding the product before you invest your money. Other's opinion is just theirs, DYODD.

Also depends on the product even if they can sell.
High comm ones surely sing praises.

Always DYODD and never trust comm-based agents even if they are yr relatives!
*Conflict of interest is Real

 

[BBCWatcher]

You may have missed the point that you have to withdraw from SRS over a 10 year cycle to maximise the tax savings.

One would think it's obvious that I didn't miss the point because I specifically mentioned SRS accounts in my post.

I'm trying to figure out which SRS account holders have a single whole account cash premium available inside their SRS accounts. What are they supposed to do? Sell all their investments now (at whatever prices they can fetch), then buy this product? Wouldn't they be better off selling their investments progressively, over 10 years, and within the context of any maturing bonds for example? Or even performing 10 consecutive in-kind asset transfers out of their SRS accounts (because that's allowed)?

Just because something seems like a decent idea "on paper" doesn't necessarily mean it's operational in the real world. If you've got your whole SRS account just parked as cash earning 0.05% interest, that's already a bigger problem to solve. I suppose if you're age 62+ and that's your situation, maybe you should call a Manulife salesperson. Otherwise, huh?

 

[sglandscape]

One would think it's obvious that I didn't miss the point because I specifically mentioned SRS accounts in my post.

I'm trying to figure out which SRS account holders have a single whole account cash premium available inside their SRS accounts. What are they supposed to do? Sell all their investments now (at whatever prices they can fetch), then buy this product? Wouldn't they be better off selling their investments progressively, over 10 years, and within the context of any maturing bonds for example? Or even performing 10 consecutive in-kind asset transfers out of their SRS accounts (because that's allowed)?

Just because something seems like a decent idea "on paper" doesn't necessarily mean it's operational in the real world. If you've got your whole SRS account just parked as cash earning 0.05% interest, that's already a bigger problem to solve. I suppose if you're age 62+ and that's your situation, maybe you should call a Manulife salesperson. Otherwise, huh?

Perhaps you do not understand the people who tend to use the SRS (less appetite for risk, prefer cash products like SSBs, fixed deposits or bond funds, or dividend yielding stocks in Singapore. With that as a backdrop, it's quite clear the product is meant for this group of people who would be retiring (early 60s), and are planning to cash out over the next 8-10 years.

Would they be better off leaving it in their existing investment? Sure. My best guess would be, this would displace minimally the SSB allocation.

 

[BBCWatcher]

Perhaps you do not understand the people who tend to use the SRS (less appetite for risk, prefer cash products like SSBs, fixed deposits or bond funds, or dividend yielding stocks in Singapore.

I wouldn't lump "dividend yielding stocks in Singapore" in that same bucket.

With that as a backdrop, it's quite clear the product is meant for this group of people who would be retiring (early 60s), and are planning to cash out over the next 8-10 years.
Would they be better off leaving it in their existing investment? Sure. My best guess would be, this would displace minimally the SSB allocation.

SSBs can be liquidated to buy Manulife's SteadyPayout product. MBH and A35 could, too. There are transaction costs to do that, of course.

Fixed deposits would take some time to liberate since you'd typically wait until they term out. Other Singapore Government Securities and individual bonds would be fairly awkward to liquidate before maturity.

Another complication is that most SRS account holders shouldn't actually take as long as 10 years to withdraw. Generally they can withdraw $40,000 per year tax free. And generally they don't have $400,000+ SRS accounts. Really what they should be doing once they start withdrawals is to withdraw as fast as allowed ($40,000 per year) until their account is drained. Which might be 5 years ($200,000), for example.

For all these reasons I think this product makes more sense as a "What do I do with my OA dollars (in early retirement) since I can't put any more into RA?" product. SRS accounts have been around a long time, but the removal of SA accounts happened this past January — when this SteadyPayout product debuted. I don't think that's an accident. But it's still a fairly bizarre product.

 

[sglandscape]

I wouldn't lump "dividend yielding stocks in Singapore" in that same bucket.

SSBs can be liquidated to buy Manulife's SteadyPayout product. MBH and A35 could, too. There are transaction costs to do that, of course.

Fixed deposits would take some time to liberate since you'd typically wait until they term out. Other Singapore Government Securities and individual bonds would be fairly awkward to liquidate before maturity.

Another complication is that most SRS account holders shouldn't actually take as long as 10 years to withdraw. Generally they can withdraw $40,000 per year tax free. And generally they don't have $400,000+ SRS accounts. Really what they should be doing once they start withdrawals is to withdraw as fast as allowed ($40,000 per year) until their account is drained. Which might be 5 years ($200,000), for example.

For all these reasons I think this product makes more sense as a "What do I do with my OA dollars (in early retirement) since I can't put any more into RA?" product. SRS accounts have been around a long time, but the removal of SA accounts happened this past January — when this SteadyPayout product debuted. I don't think that's an accident. But it's still a fairly bizarre product.

Based on MOF stats, about 19% of SRS balances are allocated as 0.05% earning Cash, 11% in unit trust, 25% in insurance products, 25% in shares, REITs, etf, 21% in items like SSB, SGS, bonds and other funds.

Average SRS contribution is around 9k per year. SRS started in 2001, assuming you contributed in the last 24 years with a 3% yearly return, you'll have around 300k in your SRS account today. I'm quite certain for the savvy ones who bought the local bank stocks would have easily made a much higher return that their balances would easily exceed 500k today.

 

[surefire888]

Yes it is 105%. If all focus on death benefit then the IRR will be high in the first few years (3-5%) then gradually go down to low range of 1.2% and up again till the 8th year where this could hit 4.1% then eventually 4% when matured.

Here are the results of my calculations. Assumes death benefit paid together with final payout for ease of IRR calculation. IRR in brackets

Yr1 13450+91550=105000 (5.0%)
Yr2 (13450*2)+78100=105000 (2.6%)
Yr3 (13450*3)+64650=105000 (1.9%)
Yr4 (13450*4)+51200=105000 (1.5%)
Yr5 (13450*5)+37750=105000 (1.3%)
Yr6 (13450*6)+24300=105000 (1.2%)
Yr7 (13450*7)+13450=107600 (1.7%)
Yr8 (13450*8)+13450=121050 (4.1%)
Yr9 (13450*9)=121050 (4.0%)

Highest IRR is at Yr1! Lowest at Yr6

 

[ZinY]

Here are the results of my calculations. Assumes death benefit paid together with final payout for ease of IRR calculation. IRR in brackets

Yr1 13450+91550=105000 (5.0%)
Yr2 (13450*2)+78100=105000 (2.6%)
Yr3 (13450*3)+64650=105000 (1.9%)
Yr4 (13450*4)+51200=105000 (1.5%)
Yr5 (13450*5)+37750=105000 (1.3%)
Yr6 (13450*6)+24300=105000 (1.2%)
Yr7 (13450*7)+13450=107600 (1.7%)
Yr8 (13450*8)+13450=121050 (4.1%)
Yr9 (13450*9)=121050 (4.0%)

Highest IRR is at Yr1! Lowest at Yr6

So, if the policy holder don't die within Yr1, he/she will earn 4% interest rate only after Yr8 payout.

 

[CrashWire]

It’s hard to figure out who should buy this product. I don’t see how it really works for SRS drawdowns. Does anyone really have a single cash premium they could pay from SRS? If they do, they may have bigger problems.

From the discussion, I initially thought that the policy was a life annuity that could extend the 10 year withdrawal period, but it isn't.

 

[surefire888]

From the discussion, I initially thought that the policy was a life annuity that could extend the 10 year withdrawal period, but it isn't.

It's a term annuity rather than a life annuity

 

[surefire888]

One would think it's obvious that I didn't miss the point because I specifically mentioned SRS accounts in my post.

I'm trying to figure out which SRS account holders have a single whole account cash premium available inside their SRS accounts. What are they supposed to do? Sell all their investments now (at whatever prices they can fetch), then buy this product? Wouldn't they be better off selling their investments progressively, over 10 years, and within the context of any maturing bonds for example? Or even performing 10 consecutive in-kind asset transfers out of their SRS accounts (because that's allowed)?

Just because something seems like a decent idea "on paper" doesn't necessarily mean it's operational in the real world. If you've got your whole SRS account just parked as cash earning 0.05% interest, that's already a bigger problem to solve. I suppose if you're age 62+ and that's your situation, maybe you should call a Manulife salesperson. Otherwise, huh?

There is no necessity to put the whole intended premium into a single policy as long as they are all in the same year hence no need to liquidate every investment before buying the product

For eg, if a person wanted to put $300k from his srs into this product to get a tax-free withdrawal of $40k per year and his funds are currently in 6 TBs that mature at different months in the same year, he could buy 6 policies as and when each TB matures. Of course, for some people, their investments may mature over different calendar years - just wanted to point out that it is not as limiting as it seems at first glance

 

[BBCWatcher]

I really don’t think this product is particularly aimed at SRS account holders. Manulife isn’t aggressively marketing it that way — not that I’ve found anyway. It’s generally too awkward for SRS drawdown purposes for all the reasons given. All signs point to this product attempting to solve the “What do I do now that my CPF SA is gone?” problem. Even the 4.0% rate (if you live long enough) matches SA’s floor rate, and I don’t think that’s a coincidence.

 

[surefire888]

I really don’t think this product is particularly aimed at SRS account holders. Manulife isn’t aggressively marketing it that way — not that I’ve found anyway. It’s generally too awkward for SRS drawdown purposes for all the reasons given. All signs point to this product attempting to solve the “What do I do now that my CPF SA is gone?” problem. Even the 4.0% rate (if you live long enough) matches SA’s floor rate, and I don’t think that’s a coincidence.

To me, SRS is the only source of funds that makes some sense because of the 10yr drawdown requirement for tax efficiency hence loss of liquidity is less of an issue

This product is not open to CPF funds and to use cash would be too much of a sacrifice of liquidity for the possible 4% yield being offered with the risk of getting much less. For cash, there are plenty of more attractive options

What signs point to this product attempting to solve the “What do I do now that my CPF SA is gone?” problem? The 4% rate? I think this is just the rate that Manulife thinks will be attractive enough to attract buyers given the features of the product.

What about the 9yr drawdown then? On your basis, couldn't you also argue that this is not coincidence and points to the product being aimed at SRS? Why 9 years and not 10? Because if Manulife had chosen the more obvious 10yr drawdown period, it would have been impractical for srs withdrawals

 

[BBCWatcher]

To me, SRS is the only source of funds that makes some sense because of the 10yr drawdown requirement for tax efficiency hence loss of liquidity is less of an issue

But it’s not really designed for that, not well anyway. And SRS accounts didn’t suddenly pop up this past January. CPF SA closures happened this January.

You’re aware you can move invested assets out of a SRS account in-kind, right? What’s wrong with that? No liquidity constraints, no asset sales required, no appreciable misalignment with $40K/year withdrawal pacing, no “What next?” issues if you don’t spend the income, no weird penalties if you die too soon…. Withdrawing from an SRS account is a well solved problem!

This product is not open to CPF funds….

Yes it is. It was introduced in January with a 4.0% advertised yield — not a coincidence. Every CPF member age 55+ who’s met the Full Retirement Sum (or Basic Retirement Sum with property pledge/charge) can use all their OA dollars to buy this product if they wish.

….and to use cash would be too much of a sacrifice of liquidity for the possible 4% yield being offered with the risk of getting much less. For cash, there are plenty of more attractive options

Such as?

I think this is most directly aimed at the ex-SA crowd who were going to withdraw 4.0%+ SA over the next several years to support retirement (or partial retirement) and who now would withdraw 2.5% OA over the next several years.

What signs point to this product attempting to solve the “What do I do now that my CPF SA is gone?” problem? The 4% rate? I think this is just the rate that Manulife thinks will be attractive enough to attract buyers given the features of the product.

Oh come on. You think January and 4.0% are coincidences? I don’t.

What about the 9yr drawdown then? On your basis, couldn't you also argue that this is not coincidence and points to the product being aimed at SRS? Why 9 years and not 10? Because if Manulife had chosen the more obvious 10yr drawdown period, it would have been impractical for srs withdrawals

In the (what…) couple decades of SRS accounts Manulife just thought to introduce a fixed term annuity in 2025? When there’s not an actual problem to solve since in-kind distributions are allowed?

Yes, of course some SRS account holders will look at this and might find it works for them. By the way, wouldn’t payouts actually be credited inside your SRS account if you’re using SRS dollars to buy it? Which is a good thing (not complaining), but it emphasizes the fact SRS purchasable fixed term annuities aren’t at all new. But SA downshifted to OA is new, and obviously engineering an advertised 4.0% yield is extremely important to those individuals.

 

[surefire888]

But it’s not really designed for that, not well anyway. And SRS accounts didn’t suddenly pop up this past January. CPF SA closures happened this January.

You’re aware you can move invested assets out of a SRS account in-kind, right? What’s wrong with that? No liquidity constraints, no asset sales required, no appreciable misalignment with $40K/year withdrawal pacing, no “What next?” issues if you don’t spend the income, no weird penalties if you die too soon…. Withdrawing from an SRS account is a well solved problem!

Yes it is. It was introduced in January with a 4.0% advertised yield — not a coincidence. Every CPF member age 55+ who’s met the Full Retirement Sum (or Basic Retirement Sum with property pledge/charge) can use all their OA dollars to buy this product if they wish.

Such as?

I think this is most directly aimed at the ex-SA crowd who were going to withdraw 4.0%+ SA over the next several years to support retirement (or partial retirement) and who now would withdraw 2.5% OA over the next several years.

Oh come on. You think January and 4.0% are coincidences? I don’t.

In the (what…) couple decades of SRS accounts Manulife just thought to introduce a fixed term annuity in 2025? When there’s not an actual problem to solve since in-kind distributions are allowed?

Yes, of course some SRS account holders will look at this and might find it works for them. By the way, wouldn’t payouts actually be credited inside your SRS account if you’re using SRS dollars to buy it? Which is a good thing (not complaining), but it emphasizes the fact SRS purchasable fixed term annuities aren’t at all new. But SA downshifted to OA is new, and obviously engineering an advertised 4.0% yield is extremely important to those individuals.

Come on. Manulife and other insurance companies come out with dozens of new products every year. So they are all aimed for the ex-SA crowd because they were launched in 2025?

If you are over 55 and meet the conditions you described, using OA is the same as using cash because the OA can be withdrawn. So what is your point? And if u can't think of alternative more attractive products to buy with unencumbered cash, maybe u need to speak to a financial adviser

It's very obvious that you will carry on thinking what you want to think so i won't waste anymore time debating this. It doesn't matter anyway who this product is meant for. Each potential customer should just decide if the terms and features suit their particular situation

 

[sglandscape]

Here are the results of my calculations. Assumes death benefit paid together with final payout for ease of IRR calculation. IRR in brackets

Yr1 13450+91550=105000 (5.0%)
Yr2 (13450*2)+78100=105000 (2.6%)
Yr3 (13450*3)+64650=105000 (1.9%)
Yr4 (13450*4)+51200=105000 (1.5%)
Yr5 (13450*5)+37750=105000 (1.3%)
Yr6 (13450*6)+24300=105000 (1.2%)
Yr7 (13450*7)+13450=107600 (1.7%)
Yr8 (13450*8)+13450=121050 (4.1%)
Yr9 (13450*9)=121050 (4.0%)

Highest IRR is at Yr1! Lowest at Yr6

Touch wood, this assumes death which is the absolute worse case scenario. Otherwise you'll get an IRR of 4%.