Manulife SteadyPayout

[sglandscape]

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.

Not clear to me why would someone give up a 2.5% floor to interest rates, going into a rate cut cycle VS a 4% yield with an average duration of 5+ years (the manulife product). You give up the OA 2.5% feature once you withdraw.

The hurdle rate for SRS funds is a lot lower compared to CPF OA funds (which has ballooned due to closure of the SA account for the retired).

 

[BBCWatcher]

Not clear to me why would someone give up a 2.5% floor to interest rates, going into a rate cut cycle VS a 4% yield with an average duration of 5+ years (the manulife product). You give up the OA 2.5% feature once you withdraw.

You would if you're going to withdraw those OA dollars anyway for living expenses, ahead of CPF LIFE payouts as a notable example. So if you want a ~9 year "bridge" to CPF LIFE income, there you go. Manulife has a potentially interesting offer for you.

And you're not necessarily giving up OA. Every retiree can deposit up to $37,740 per year fairly efficiently into CPF OA. All $37,740 goes into OA when their MA is at the BHS and RA at the FRS -- or at the BRS with property pledge/charge. You can also repay OA used for housing, plus accrued interest, any time you wish in any amount. Moreover, right now you can yank dollars out of OA and drop them into higher yielding SSBs -- up to $200,000 per person -- which run for 10 years and have monthly liquidity. So even if you think there's a lower interest rate cycle coming you can cover that forecast quite well for the next 10 years and up to $200K. And still redeposit at least $377,400 (10 times $37,740) over that 10 year period if you wish.

The hurdle rate for SRS funds is a lot lower compared to CPF OA funds (which has ballooned due to closure of the SA account for the retired).

SRS account holders are supposed to be somewhat savvy. OA dollar surpluses are more "accidental."

 

[DevilPlate]

You would if you're going to withdraw those OA dollars anyway for living expenses, ahead of CPF LIFE payouts as a notable example. So if you want a ~9 year "bridge" to CPF LIFE income, there you go. Manulife has a potentially interesting offer for you.

And you're not necessarily giving up OA. Every retiree can deposit up to $37,740 per year fairly efficiently into CPF OA. All $37,740 goes into OA when their MA is at the BHS and RA at the FRS -- or at the BRS with property pledge/charge. You can also repay OA used for housing, plus accrued interest, any time you wish in any amount. Moreover, right now you can yank dollars out of OA and drop them into higher yielding SSBs -- up to $200,000 per person -- which run for 10 years and have monthly liquidity. So even if you think there's a lower interest rate cycle coming you can cover that forecast quite well for the next 10 years and up to $200K. And still redeposit at least $377,400 (10 times $37,740) over that 10 year period if you wish.

SRS account holders are supposed to be somewhat savvy. OA dollar surpluses are more "accidental."

Never cross my mind for a retiree to top up to OA.

 

[BBCWatcher]

Never cross my mind for a retiree to top up to OA.

Fairly unlikely, but the option is available to some extent.

 

[sglandscape]

You would if you're going to withdraw those OA dollars anyway for living expenses, ahead of CPF LIFE payouts as a notable example. So if you want a ~9 year "bridge" to CPF LIFE income, there you go. Manulife has a potentially interesting offer for you.

And you're not necessarily giving up OA. Every retiree can deposit up to $37,740 per year fairly efficiently into CPF OA. All $37,740 goes into OA when their MA is at the BHS and RA at the FRS -- or at the BRS with property pledge/charge. You can also repay OA used for housing, plus accrued interest, any time you wish in any amount. Moreover, right now you can yank dollars out of OA and drop them into higher yielding SSBs -- up to $200,000 per person -- which run for 10 years and have monthly liquidity. So even if you think there's a lower interest rate cycle coming you can cover that forecast quite well for the next 10 years and up to $200K. And still redeposit at least $377,400 (10 times $37,740) over that 10 year period if you wish.

SRS account holders are supposed to be somewhat savvy. OA dollar surpluses are more "accidental."

Fair point on ability to top-up OA again, but this would only apply if you have met all the respective minimum sums otherwise there will be "leakage".

 

[BBCWatcher]

Fair point on ability to top-up OA again, but this would only apply if you have met all the respective minimum sums otherwise there will be "leakage".

Well, you can't really withdraw much in the first place if you haven't met at least the Full Retirement Sum (or Basic Retirement Sum with property pledge/charge) in your Retirement Account. You won't be trying to put OA dollars back in until you've ticked that box.

The remaining "leakage" will be into MediSave. But something special happens when a retiree with "excess" cash pegs his/her MA at the Basic Healthcare Sum: the interest is paid into OA every December 31st where it's available to withdraw. And that's 4.0%+ interest, not 2.5% interest. Moreover, the retiree's BHS is fixed from age 65 making it that much easier to peg at the BHS. And there don't seem to be huge difficulties spending MA dollars as a retiree of advancing age if/when you'd like to drop below the BHS.

 

[spawn1800]

1. If you purchase this SteadyPayout using SRS, do the payout go back to SRS or out of SRS account ?
2. If payment out of SRS account, do this trigger as SRS withdrawal commences where u need to withdraw all remaining SRS sum in 10 yrs ?
3. If the payment don't trigger as SRS withdrawal, this will become a backdoor to withdraw SRS sum tax free indefinitely (assuming such plan still available every 9 yrs).
4. If the payout go back to SRS, in today declining interest environment, can treat this SteadyPayout as 9yrs SSB

what do you think ?

 

[BBCWatcher]

1. If you purchase this SteadyPayout using SRS, do the payout go back to SRS or out of SRS account ?

Confirm this with Manulife, but it should be back into your SRS account.

2. If payment out of SRS account, do this trigger as SRS withdrawal commences where u need to withdraw all remaining SRS sum in 10 yrs ?

Back into your SRS account would mean no.

3. If the payment don't trigger as SRS withdrawal, this will become a backdoor to withdraw SRS sum tax free indefinitely (assuming such plan still available every 9 yrs).

No. There's no "backdoor." I'm not sure what you mean by that.

4. If the payout go back to SRS, in today declining interest environment, can treat this SteadyPayout as 9yrs SSB
what do you think ?

If you really believe that interest rates will fall and stay lower then SteadyPayout isn't a great choice. You're getting payouts, remember. What are you going to do with those payouts when fixed deposits are paying 0.8% p.a. (for example)? If you aren't going to spend the payouts on real goods and services — which for SRS accounts means starting and continuing to make your withdrawals — then you're also betting on future interest rates. It's a much more complicated bet than "4% for a decade or so," because that's not the actual bet. And this is a VERY common pitfall, that (for example) people look at the shiny T-bill paying 4.1% p.a. (or whatever) and forget that the deal ends in 6 months. With SteadyPayout the deal partially ends every year. And if those payouts emerge in a low market interest rate world (and with comparatively high stock prices for example), tough luck!

That's why I keep trying to say in various ways that long-term dollars shouldn't be riding in short-term or medium-term vehicles. If you're going to spend SteadyPayout payouts on goods and services, it might be attractive and work at least decently enough. If you're going to reinvest payouts, SteadyPayout is clearly less attractive. Whether it's still attractive enough depends on what your alternatives are.

 

[surefire888]

1. If you purchase this SteadyPayout using SRS, do the payout go back to SRS or out of SRS account ?

Without confirming with Manulife, i am sure it goes back to your srs ac. It should be no different from other investment products that you buy using srs funds like shares or TBs or SSBs. Hence yr (2) and (3) are not applicable

As for (4), i wouldn't equate this to an SSB. For SSBs, you get only the interest each 6 monthly period whereas here you get repayment of capital as well. SSBs also have monthly liquidity in that you can cash out prematurely without any penalty unlike for this product. This product also has mortality risk. As i have mentioned earlier, in my opinion this is best suited for SRS fund withdrawal and not as a cash investment product

 

[DevilPlate]

Confirm this with Manulife, but it should be back into your SRS account.

Back into your SRS account would mean no.

No. There's no "backdoor." I'm not sure what you mean by that.

If you really believe that interest rates will fall and stay lower then SteadyPayout isn't a great choice. You're getting payouts, remember. What are you going to do with those payouts when fixed deposits are paying 0.8% p.a. (for example)? If you aren't going to spend the payouts on real goods and services — which for SRS accounts means starting and continuing to make your withdrawals — then you're also betting on future interest rates. It's a much more complicated bet than "4% for a decade or so," because that's not the actual bet. And this is a VERY common pitfall, that (for example) people look at the shiny T-bill paying 4.1% p.a. (or whatever) and forget that the deal ends in 6 months. With SteadyPayout the deal partially ends every year. And if those payouts emerge in a low market interest rate world (and with comparatively high stock prices for example), tough luck!

That's why I keep trying to say in various ways that long-term dollars shouldn't be riding in short-term or medium-term vehicles. If you're going to spend SteadyPayout payouts on goods and services, it might be attractive and work at least decently enough. If you're going to reinvest payouts, SteadyPayout is clearly less attractive. Whether it's still attractive enough depends on what your alternatives are.

Hmmm now this plan seems suitable for me sia after your reasoning.

It can form a part of my yearly expenditure.
Let say i intend to spend 10k on yearly holidays for eg…..it maybe suitable for me?

 

[CaptainWu]

Hmmm now this plan seems suitable for me sia after your reasoning.

It can form a part of my yearly expenditure.
Let say i intend to spend 10k on yearly holidays for eg…..it maybe suitable for me?

I am told the plan is closed, think you have to move on to next plan.

 

[surefire888]

I am told the plan is closed, think you have to move on to next plan.

Oops, looks like we can close this thread now

 

[DevilPlate]

I am told the plan is closed, think you have to move on to next plan.

Teaser sia
Masses deemed it to be super attractive

 

[BBCWatcher]

Hmmm now this plan seems suitable for me sia after your reasoning.
It can form a part of my yearly expenditure.
Let say i intend to spend 10k on yearly holidays for eg…..it maybe suitable for me?

Moot now apparently — it looks like Manulife has pulled SteadyPayout from their Web site — but "maybe" seems about right.

There probably aren't that many people with a lump sum lying around (some random bonus?) who also have fixed and predictable spending for about a decade that they aren't going to be able to pay from ordinary income. Maybe if you have a child or other family member with a long university sequence in Singapore (including graduate school), and you're retiring next year? Or maybe if you buy a car (10 year COE) and want some instrument to pay the reasonably fixed costs (insurance, parking) along the way?

Seems far fetched. And I don't get the SRS account idea either when in-kind distributions exist. I kind of get the "Oh, I have OA dollars now and 10ish years until CPF LIFE...what do I do?" situation.

It wasn't our job to help Manulife sell its product. We were just trying to understand it.

 

[boredboiboi]

Hmmm now this plan seems suitable for me sia after your reasoning.

It can form a part of my yearly expenditure.
Let say i intend to spend 10k on yearly holidays for eg…..it maybe suitable for me?

Plan is no longer available.