New Cpf Life Calculation

[orwell76]

More than the CEO of a commercial insurance company, yes. Which is rather the whole point.

post SGH cover-up
I have doubts about him

 

[SBC]

No clear visibility and clarity for such nation-wide program.

 

[henrylbh]

http://financial-planning-advice.blogspot.com/2009/07/cpf-life-does-it-payout-for-life.html

MANPOWER Minister Gan Kim Yong has assured Singaporeans they will receive a monthly payout from the CPFLife annuity scheme for the rest of their lives, despite a 'disturbing' provision in the new law.

He gave this pledge on Monday when replying to Madam Halimah Yacob (Jurong GRC) and Madam Ho Geok Choo (West Coast GRC).
They were debating a major change to the Central Provident Fund (CPF) Act that will introduce the CPFLife scheme. This will give members a steady stream of retirement income from age 65. However, both MPs were worried by the lack of guarantee on premiums and payouts in the new law, which they argued gave the Government too much discretion in deciding the amounts.

Mr Gan, in his bid to allay any fears, said it was not feasible to guarantee the amount paid. This is because the monthly sum would have to be adjusted regularly, 'taking into account interest rates and mortality experience to ensure the solvency of the Lifelong Income Fund'.

The fund, administered by the CPF Board, holds the money that members use to participate in the annuity scheme. But the minister was quick to add: 'CPFLife members can rest assured they will receive payouts for as long as they live.'

The remark was directed at Madam Halimah, chairman of the Government Parliamentary Committee for Manpower, who noted that the law allows the CPF Board to stop CPFLife payments unless the Lifelong Income Fund is solvent. 'While I can understand the legal basis for this provision, I find it quite disturbing to have it reflected in the Bill,' she said.

There are similar clauses for commercial insurance companies, she noted, but added: 'The relationship between the CPF Board and the CPF members, however, is not just a legal contract but... a social contract as the board has a social responsibility to manage CPF funds prudently in order to help Singaporeans meet their retirement needs.' She wanted to know what are the safeguards for protecting CPF members against the risk of the fund's insolvency.

Do you trust Gan?

Insurance benefits illustrations will clearly separate guarantee from non-guarantee payout. CPF Life promoted to the public never highlighted that it's not guaranteed, except by word of mouth?

 

[henrylbh]

Thanks for sharing and updating. That's why I think most important thing is to make sure the fund is sustainable under current model rather than keep paying super high interest rate. Get my point?

Anyway, I stick with my opinion, rate hike will affect fund payout.

All else remains the same, the only way for it to be sustainable is for more to die by age the LIF expects and not the expected live expectancy as that would involve risk that the fund will run out.

 

[henrylbh]

All else remains the same, the only way for it to be sustainable is for more to die by age the LIF expects and not the expected live expectancy as that would involve risk that the fund will run out. Otherwise, the payout must go down.

 

[winguy]

Have a qn which is very simple.
Based on what you can control, if you have more than FRS or ERS amount and have a pledgeable property at age 55 (most middle income group should fall into this category), what would you choose, and how would you withdraw your cpf over the years?

 

[henrylbh]

Have a qn which is very simple.
Based on what you can control, if you have more than FRS or ERS amount and have a pledgeable property at age 55 (most middle income group should fall into this category), what would you choose, and how would you withdraw your cpf over the years?

If you pledge property to take out half of FRS, what do you intend to do with it?

ERS? Must be dumb if money comes from SA especially. Even if from OA, I might consider leaving it in OA with lower interest but withdrawable/investible anytime.

 

[orwell76]

Insurance benefits illustrations will clearly separate guarantee from non-guarantee payout. CPF Life promoted to the public never highlighted that it's not guaranteed, except by word of mouth?

this is a fact that cpf life advertisement omit unless you read the cpf amendment act of 2009

 

[BBCWatcher]

this is a fact that cpf life advertisement omit....

Then why does CPF LIFE publish a range of payouts in its examples? Why then does CPF carefully explain that monthly payouts are not fixed:

Q: Is the CPF LIFE monthly payout fixed?
A: No....

and why they are not fixed?

 

[henrylbh]

Then why does CPF LIFE publish a range of payouts in its examples? Why then does CPF carefully explain that monthly payouts are not fixed:


and why they are not fixed?

All are led to believe that payout is for life, though amount is not fixed as payout depends on mortality and interest rate basically. Interest rate depends on the government and mortality rate depends on God and both don't give guarantee

There was no mention that there shall be no payout if LIF is insolvent, though that may be very remote.

Delving on the issue, I come to the conclusion that there is also no guarantee on our CPF money?

 

[BBCWatcher]

All are led to believe that payout is for life....

Yes....

....though amount is not fixed as payout depends on mortality and interest rate basically. Interest rate depends on the government and mortality rate depends on God and both don't give guarantee

There are also "space rock" risks -- Singapore's low but non-zero existential risks. There are no absolute guarantees in life or in CPF LIFE.

Let's consider actuarial mortality for a moment. The government says it might have to adjust payouts if mortality experiences are substantially better or worse than forecast. But even with infinite lifespan -- 100% of Singaporeans suddenly become immortal -- the payouts cannot fall to zero unless real interest rates also fall to zero. As a bit of daydreaming I suppose that hypothetical is interesting, but it ain't going to happen.

Look, this is interesting and all, but what's the more reliable alternative lifetime annuity compared to CPF LIFE? CPF LIFE doesn't claim to be cosmic perfection, and it's completely unreasonable to expect such a perfect, space rock-proof guarantee. That doesn't exist, and that cannot exist. Even the most credit worthy sovereign is not infallible. But if this reality (that no one I know is confused about) still upsets you, then OK, what do you recommend as an alternative lifetime annuity? Be specific.

 

[henrylbh]

If interest on CPF or CPF Life is held constant, I see no merit in CPF Life when RSS of 166k with 1200 payout can last close to 100 yo. The RSS payout can also be adjusted if needed. Basically, CPF Life has no merit other than just taking from one to pay another with some spare for wrong bet.

 

[orwell76]

Then why does CPF LIFE publish a range of payouts in its examples? Why then does CPF carefully explain that monthly payouts are not fixed:


and why they are not fixed?

show me which advertisement states the "lifelong providen fund shall not pay unless it's solvent"

 

[w1rbelw1nd]

Yes....

Let's consider actuarial mortality for a moment. The government says it might have to adjust payouts if mortality experiences are substantially better or worse than forecast. But even with infinite lifespan -- 100% of Singaporeans suddenly become immortal -- the payouts cannot fall to zero unless real interest rates also fall to zero. As a bit of daydreaming I suppose that hypothetical is interesting, but it ain't going to happen.

Look, this is interesting and all, but what's the more reliable alternative lifetime annuity compared to CPF LIFE? CPF LIFE doesn't claim to be cosmic perfection, and it's completely unreasonable to expect such a perfect, space rock-proof guarantee. That doesn't exist, and that cannot exist. Even the most credit worthy sovereign is not infallible. But if this reality (that no one I know is confused about) still upsets you, then OK, what do you recommend as an alternative lifetime annuity? Be specific.

If the AAA-credit rating Singapore government is not able to guarantee, then who will? Anyway, aren't there insurers that are giving guaranteed payout annuities out there?

I have no doubts about the ability of CPF to pay the projected payouts, but I find it extremely unsettling why can't they commit to bearing the risk. Come on, if our awesome, immensely wealthy government can't commit to it, does it mean that in the case that when the unlikely happen, they will leave the poor to fend for themselves?

 

[henrylbh]

show me which advertisement states the "lifelong providen fund shall not pay unless it's solvent"

Same for money in CPF. No mention.

If the AAA-credit rating Singapore government is not able to guarantee, then who will? Anyway, aren't there insurers that are giving guaranteed payout annuities out there?

I have no doubts about the ability of CPF to pay the projected payouts, but I find it extremely unsettling why can't they commit to bearing the risk. Come on, if our awesome, immensely wealthy government can't commit to it, does it mean that in the case that when the unlikely happen, they will leave the poor to fend for themselves?

Believe or not, there is no direct guarantee by government on CPF or CPF Life funds. But you need to read between the lines

 

[BBCWatcher]

If the AAA-credit rating Singapore government is not able to guarantee, then who will?

Possibly some other sovereign. It depends on the nature of the space rock episode. You might not be around to care if it's literally a big space rock impacting the planet.

Anyway, aren't there insurers that are giving guaranteed payout annuities out there?

Certainly not guaranteed to these exotic extremes.

I have no doubts about the ability of CPF to pay the projected payouts, but I find it extremely unsettling why can't they commit to bearing the risk.

I don't agree with "extremely unsettling." There are more important things to worry about, like how much sauce to add to your noodles today.

Keep in mind that the very same government prints (metaphorically and actually) the Singapore dollars that CPF LIFE pays out. You'll find no guarantee, anywhere, stating how many dollars the Monetary Authority of Singapore will print even 5 minutes from now never mind years or decades from now, much less how much purchasing power those dollars will have. CPF LIFE isn't paying out bags of rice, flights to Bali, shoes, cataract surgeries, or any of the myriad goods and services that recipients buy. It's only paying out nominal Singapore dollars. Sovereigns are special.

 

[w1rbelw1nd]

Keep in mind that the very same government prints (metaphorically and actually) the Singapore dollars that CPF LIFE pays out. You'll find no guarantee, anywhere, stating how many dollars the Monetary Authority of Singapore will print even 5 minutes from now never mind years or decades from now, much less how much purchasing power those dollars will have. CPF LIFE isn't paying out bags of rice, flights to Bali, shoes, cataract surgeries, or any of the myriad goods and services that recipients buy. It's only paying out nominal Singapore dollars. Sovereigns are special.

The part of the sauce, well, I could also say that having an annuity is not as important as whether I have chili sauce with my chicken rice...

Anyway, doesnt SG government ability to print notes put it at a better position to manage the black swan events that we are talking about? We are not talking about alien invasion/asteroid here, but maybe an extreme version of AFC.

Put another way, the government has an insane amount of options (estate/inheritance tax, GST, stamp duties, land sale, license sales) to raise funds, even in black swan events. Why cant they commit to a guaranteed payout? Is there even a reasonable rationale for them not committing to protecting the citizens welfare?

Granted, insurers' guarantee only means as much as that they remain solvent, but at the least we know what is the minimum payout we can expect from them if they are solvent.

Are you saying we should never expect our government to commit to a minimum payout? Or that the returns the government promised is so high that it doesnt warrant a guarantee? I am really interested to find out the principles behind your opinions

 

[orwell76]

The part of the sauce, well, I could also say that having an annuity is not as important as whether I have chili sauce with my chicken rice...

Anyway, doesnt SG government ability to print notes put it at a better position to manage the black swan events that we are talking about? We are not talking about alien invasion/asteroid here, but maybe an extreme version of AFC.

Granted, insurers' guarantee only means as much as that they remain solvent, but at the least we know what is the minimum payout we can expect from them if they are solvent.

Are you saying we should never expect our government to commit to a minimum payout? Or that the returns the government promised is so high that it doesnt warrant a guarantee? I am really interested to find out the principles behind your opinions

only 40,000 of the eligible 660,000 opted for CPF Life in 2009 already says alot about the scheme liao

 

[limchooc]

I am already on FRS, thinking about going for ERS by top up 80k with cash so that I can get higher monthly payout when I hit 65. Is it worth it ?

 

[w1rbelw1nd]

I am already on FRS, thinking about going for ERS by top up 80k with cash so that I can get higher monthly payout when I hit 65. Is it worth it ?

It would be highly irresponsible for us to make any suggestion given that we know nothing about your circumstances.

CPF Life gives a fair return, not a fantastic one.